The Dow Jones industrial average closed Friday above 11,000 for the first time since early May as the markets digested news of another weak report on unemployment, fueling expectations the Federal Reserve will step in to help the economy.
High unemployment remains a major hurdle as economic growth continues to be sluggish. The Labor Department's report, considered the most important piece of news on the economic calendar, did little to alter the view that the economy remains weak.
While job creation remains scarce, however, there could be a silver lining. Expectations are growing that the Fed will try to stimulate the economy by stepping up its purchases of government bonds. The gloomy jobs report could give the U.S. central bank more incentive to act.
Jason Pride, director of investment strategy at wealth management firm Glenmede, said "by not being stronger, (the jobs report) gives them the window of opportunity to take action."
Anticipation of the Fed making a move has driven bond yields and the dollar sharply lower in recent days. Bond yields fell again Friday after the jobs report was released. The yield on the two-year note hit a new record low, but the dollar crept slightly higher.
The Fed's goal, if it starts buying bonds again, would be to drive interest rates down further from their already low levels and spark borrowing and spending. Lower rates could also eventually drive investors into riskier assets like stocks or into currencies in countries with more attractive interest rates.
Scott Brown, a senior vice president and chief economist at Raymond James & Associates, predicted the Fed would announce a specific plan when it wraps up its next meeting Nov. 3. But Brown warned not to expect an immediate improvement in the economy after the Fed starts buying bonds again.
"It's a long process. It doesn't happen overnight," Brown said. "The key factor in a recovery is time."
The Dow rose 57.90, or 0.5 percent, at 11,006.48. It hadn't traded above the psychological 11,000 barrier since May 4, just days before the "flash crash" spooked investors and added to a broad sell-off during the spring. The Dow last closed above 11,000 on May 3.
About three stocks rose for every two that fell on the New York Stock Exchange, where volume came to 945 million shares.
Broader markets were also higher Friday. The Standard & Poor's 500 index rose 7.09, or 0.6 percent, at 1,165.15, while the Nasdaq composite index rose 18.24, or 0.8 percent, at 2,401.91.
For the week, the Dow and the S&P 500 each rose 1.6 percent, while the Nasdaq gained 1.3 percent. For the year, the Dow has added 5.5%, the S&P is up 4.5%, and the Nasdaq 5.9% higher.
The 11,000 milestone, which effectively erases the effects of a long summer slump for stocks, comes one day before the three-year anniversary of the market's all-time high. The Dow is still 22.3 percent below that level.
The yield on the 10-year Treasury note, which helps set rates on loans including mortgages, Friday fell to 2.37 percent from 2.38 percent late Thursday.
The dollar rose slightly against other currencies, stemming its recently decline. Gold rose to $1,344.10 an ounce after falling earlier in the day. Gold has been soaring as traders consider it a safe alternative to the dollar.
The dollar hit an eight-month low against the euro Thursday and has recently touched a 15-year low against Japan's yen. It has been under pressure because traders expect any action by the Fed would effectively add billions of dollars into the currency market.
The government said private employers added 64,000 workers last month, short of the 75,000 economists expected. Overall, 95,000 jobs were slashed as governments laid off workers, including temporary census employees.
The unemployment rate held steady at 9.6 percent in September. Economists polled by Thomson Reuters were expecting it to rise to 9.7 percent.
Employers have not started hiring a lot of workers because of worries about potential tax hikes and unknown costs associated with health care and financial regulatory reform passed earlier this year. Consumers have also kept their spending down, which has kept a lid on hiring.
Alcoa Inc. was the biggest gainer among the 30 stocks that make up the Dow Jones industrial average after reporting earnings that beat expectations late Thursday. Shares of the aluminum maker rose 5.7 percent to close at $12.89 after the company raised its forecast for global aluminum consumption.
Many companies have said international operations will be the driving factor in improving profits in the coming quarters because U.S. growth is so slow.
Consumer discretionary companies got a boost after hedge fund manager William Ackman took large stakes in shares of retailer JC Penney Co Inc and consumer goods manufacturer Fortune Brands Inc. JC Penney rose 2.7 percent to $32.49, while Fortune jumped 7.4 percent to $55.85.
Freeport-McMoRan Copper & Gold Inc gained 4.5 percent to $95.51, while the S&P Materials index shot up 2 percent.
Earnings are likely to become more of a factor in the market's movement in the coming weeks as hundreds of companies report results.
Carole Peck, president and founder of Carole Peck Financial Center, said "if we see positive earnings and projections for the fourth quarter are fairly decent, that should play positively."
Strong earnings results and upbeat corporate outlooks drove the Dow up 7.1 percent in July.
Overseas, Britain's FTSE 100 fell 0.1 percent, Germany's DAX index rose 0.3 percent, and France's CAC-40 slid 0.2 percent. Japan's Nikkei stock average fell 1 percent.