An encouraging U.S. jobs report propelled blue-chip stocks to their highest level since October 2007 on Friday, closing above the closely watched 14,000 bulwark as investors momentarily sidelined their concerns about the recovery.
The government reported that nonfarm payrolls rose 157,000 in January, while the unemployment rate inched up by a tenth of a point, to 7.9 percent. The figures were broadly in line with Wall Street's expectations, and unlikely to change the Federal Reserve's plans to inject the economy with massive stimulus.
Indeed, some investors see the Dow's rally as a direct function of the Fed's efforts to reinflate the economy, rather than a product of the economy's fundamentals.
"Certainly given where interest rates are...the Fed is trying to push you into equities," said Eric Stein, portfolio manager at Eaton Vance. "There's a question of how much can we get with actual growth, given the fact that you have such a poor GDP print.
"The market wants QE," Stein said, speaking about the Fed's quantitative easing program, which is funneling about $85 billion a month via bond buying.
The Dow Jones Industrial Average rose by more than 150 points, ending the day above 14,000 — its highest level in more than five years and less than 200 points away from an all-time high. The S&P 500 Index rose by about 15 points, ending above 1,513, while the the Nasdaq added nearly 37 points to close above 3,179. The averages posted their fifth consecutive week of gains.
Among sector leaders were telecoms and financials, with all ten S&P 500 large cap sectors trading higher. Dow components that also helped grease the wheels of the rally included Bank of America, United Technologies, Verizon and AT&T.
Friday's employment data was a welcome salve for some skittish investors who had begun to doubt the staying power of the recovery — particularly in the wake of last quarter's surprising economic weakness. However, doubts about the significance of the stock market's rally continued to linger.
"It's not the big pop that one would think you'd get, and I for one think that's good," Jack Bogle, chairman and Founder of The Vanguard Group, told CNBC. He added that mutual funds piling into equities could be "a very negative sign for the market."
Pointing out that the Nasdaq is still "fully a third below its high", Bogle said that "the signs were mixed. I don't think the economic signs are going to change very much." He said he expects the economy to expand by 2-2.5 percent in 2013.
The rally was pushed higher by December construction data and better than expected U.S. manufacturing data, which confirmed generally buoyant global manufacturing data reported during overseas trading hours.
The employment report came as welcome news in a market that was jolted earlier this week by an unexpected contraction in the U.S. economy in the final months of 2012. While most corporate earnings have been stronger than expected, some market watchers have begun to worry that the recovery was losing steam.
Corporate America is in the thick of earnings season, most of which have met or exceeded expectations and helped keep a floor under major benchmarks. Still, most companies remain cautious about the outlook for 2013, as battles over taxes, spending and debt heat up in Washington with little immediate resolution in sight.
Oil and gas Exxon Mobil saw its fourth quarter profit surge by six percent, helped by stronger chemical and refining business and beating Wall Street's estimates. Exxon, which last week reclaimed the mantle of world's largest company from beaten-down tech giant Apple, saw its stock dip below $90 in modest trading.
Thus far, Apple is the S&P 500's worst performing stock, falling a steep 14.5 percent. In Friday's trading, the stock failed to mimic the gains of the broader stock market, little changed on the day near $455.
Excitement over the Dow's rally helped drag other stocks higher, such as Google, which briefly set a new all time high just as Apple remains mired near its lowest levels in a year. The search giant's shares traded above $774 in afternoon trading before scaling back.
Merck saw its profits rise in the latest quarter, but issued a cautious 2013 outlook that said revenues would likely fall in line with last year's levels. The less than ringing forecast sent its shares down by more than three percent, to below $42.
In a season where several major retailers have reaped the wages of a disappointing holiday shopping season, toy maker Mattel reported earnings that fell short of Wall Street's expectations. The company reported profits of $1.12 per share, three cents below estimates, with revenues also failing to meet forecasts. The stock rose modestly, trading above $38.
Zoetis roared in its market debut on the New York Stock Exchange, in the market's largest IPO since Facebook's flotation. The former animal health unit of drug behemoth Pfizer, sold 86.1 million shares at $26 in its spinoff Thursday night. In Friday's trading, the stock jumped by 19 percent, trading just shy of $31.