NEW YORK (CNNMoney.com) -- Stocks rallied Friday, with the Dow crossing 11,000 and closing above the key level for the first time in five months.
The buying frenzy came after a sharp drop in the overall jobs figures in September boosted the chances of the Fed stepping in to stimulate the economy.
"The jobs number was terrible, but it clinches the deal for another round of stimulus from the Fed on Nov. 3, and that's why the markets are screaming today," said Phil Orlando, chief equity market strategist at Federated Investors.
The Dow Jones industrial average (INDU) rose as much as 84 points, or 0.5%, to a fresh-five month intraday high of 11,032. It eased from that level in the afternoon, but still finished with a 58-point gain, led by Alcoa (AA, Fortune 500) and Caterpillar (CAT, Fortune 500). The Dow closed at 11,006, its highest level since May 3.
The last time the blue chip index traded above that level was just days before the"flash crash" that sent the Dow tumbling nearly 1,000 points in one day.
The S&P 500 (SPX) also spiked to its highest level since May, gaining 4 points, or 0.6%, on Friday. And the tech-heavy Nasdaq (COMP) added 18 points, or 0.8%, and to finish at a fresh five-month high.
Markets posted their fifth weekly gain in the last six weeks: the Dow increased 1.6%, the S&P climbed 1.7%, and the Nasdaq rose 1.3%.
All three major indexes had been drifting between small gains and losses during the first two hours of the session before the rally kicked in.
Jobs and the Fed: With unemployment figures remaining one of the defining measures of the recovery, the Labor Department's monthly jobs report has been a major market mover all year.
"The September report is another sign that the recovery remains on shaky grounds," said Peter Tuz, president at Chase Investment Council.
The economy lost 95,000 jobs in September, the government said, though the private sector added 64,000 jobs. Unemployment rate remained unchanged at 9.6%.
"The economy's sluggishness also increases the odds of the Fed pumping more money into the financial system, which is viewed as a positive sign among some investors, because it adds liquidity to the system," Tuz said
He expects the market to continue moving higher, in part on speculation about Fed action. Stocks could also gain some traction if third-quarter financial results start coming out stronger than expected.
Economy: Investors also eyed a report on wholesale inventories from the Commerce Department. Inventories increased 0.8% in August, following a 1.5% gain in July. Economists were expecting a 0.4% rise.
Companies: After the bell Thursday, Investors welcomed strong earnings from Alcoa -- the first of the Dow components to report third quarter results.
The aluminum giant earned 9 cents per share -- excluding special items -- topping Wall Street's estimates for 5 cents per share. Sales rose 15% to $5.3 billion, beating forecasts for $4.96 billion in revenue. Shares of Alcoa (AA, Fortune 500) rose 5.7%.
Bank of America (BAC, Fortune 500) dropped 1% in the afternoon, after the bank announced it is suspending foreclosures in all 50 states as its reviews possible documentation problems. Last week, Bank of America froze foreclosures in the 23 states where a court's approval is required to foreclosure on a home.
French drugmaker Sanofi-Aventis (SNY) said that it will cut 1,700 jobs in the United States before the end of the year. The company's stock rose 0.5%.
World markets: European stocks closed mixed Friday. Britain's FTSE 100 and France's CAC 40 edged lower, and the DAX in Germany added 0.3%.
Asian markets finished the session mixed. Japan's Nikkei index fell nearly 1% and the Hang Seng in Hong Kong rose 0.3%. Coming back from a week-long holiday, China's Shanghai Composite soared 3.1% after Moody's said it may raise the nation's debt rating.
The dollar index, which measures the buck against a basket of currencies, has dropped nearly 1% this week.
Gold futures climbed Friday, but remained below record highs hit earlier this week. Prices rose $10.13 an ounce Friday to settle at $1,345.30 an ounce. The precious metal settled at an all-time high of $1,347.70 Wednesday, and touched an intraday high of $1,366 an ounce on Thursday.
The price of crude oil for November delivery added 99 cents to settle $82.66 per barrel.
Bonds: The price rose on the benchmark 10-year U.S. Treasury, pushing down the yield to 2.38%.
|Overnight Avg Rate||Latest||Change||Last Week|
|30 yr fixed||3.56%||3.66%|
|15 yr fixed||2.76%||2.72%|
|30 yr refi||3.55%||3.67%|
|15 yr refi||2.80%||2.78%|
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