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NEW YORK (CNNMoney) — U.S. stocks rallied Friday, as investors cheered a much stronger-than-expected report on January job growth.

The Dow Jones industrial average (INDU) gained 157 points, or 1.3%, the SP 500 (SPX) added 17 points, or 1.3%, and the Nasdaq composite (COMP) increased 42 points, or 1.5%.

The rally pushed the pushed the Dow, up more than 5% in 2012, to the highest level since May 2008. The Nasdaq, up more than 11% for the year, climbed to its highest level since December 2000. The SP 500 has gained almost 7% this year, and is at a six-month high.

The rally was sparked by the Labor Department monthly jobs report, which showed that the U.S. economy added 243,000 jobs in January, far exceeding expectations. The unemployment rate dropped to 8.3%, the lowest since February 2009.

Economists surveyed by CNNMoney had expected the Labor Department to report an increase of just 130,000 jobs in January. The unemployment rate was expected to rise to 8.6%.

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Economists had expected a slowdown in post-holiday hiring, considering that about 40,000 temporary couriers were hired for the holidays alone.

“The jobs data blew away market expectations,” noted Marc Chandler, global head of currency strategy at Brown Brothers Harriman, calling it a “monster” jobs report. “This coupled with other recent reports for January, show the year has begun off on a firm note,” he added.

Meanwhile, investors also remain on the lookout for an official agreement on a debt-reduction plan and second bailout for Greece. The deal is expected to come by the end of the week, though deadlines have been missed in the past.

World markets: European stocks were higher in afternoon trading. Britain’s FTSE 100 (UKX) rose 1.2% while the DAX (DAX) in Germany jumped 1.3% and France’s CAC 40 (CAC40) rose 0.7%.

Asian markets ended mixed. The Shanghai Composite (SHCOMP) rose 0.8%, while the Hang Seng (HSI) in Hong Kong was flat and Japan’s Nikkei (N225) slipped 0.5%.

Economy: Factory orders for December rose 1.1%, slightly below expectations. The January installment of the ISM Services Index hit 56.8, surpassing economists’ expectations for 53.1, and up sharply from the prior month.

Companies: Financial stocks were big gainers in Friday’s rally, with Bank of America’s (BAC, Fortune 500) 5% spike leading the Dow’s gains. Morgan Stanley (MS, Fortune 500), Citigroup (C, Fortune 500) and Goldman Sachs (GS, Fortune 500) were all up between 3% and 4%.

Tyson Foods (TSN, Fortune 500) shares rose after the company reported better-than-expected earnings and issued slightly upbeat guidance.

Defense contractor Booz Allen (BAH, Fortune 500) reported strong earnings, but the stock slipped slightly.

Estee Lauder (EL, Fortune 500) reported a 15% profit increase in the fourth quarter to $597 million, but its stock tumbled.

Zynga (ZNGA) shares continue to rise, after Facebook’s IPO revealed the gamemaker accounted for 12% of its revenue in 2011.

Research in Motion (RIMM) shares dipped after the BlackBerry-maker said it will give its tablet, the BlackBerry PlayBook out to Android developers in exchange for their apps.

Currencies and commodities: The dollar rose against the euro, the British pound and the Japanese yen.

Oil for March delivery rose 65 cents to $97.01 a barrel.

Gold futures for April delivery fell $8.20 to $1,751.10 an ounce.

Bonds: The price on the benchmark 10-year U.S. Treasury fell, pushing the yield up to 1.92% from 1.82% late Thursday.  To top of page

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