The Bureau of Labor Statistics reported that the total unemployment rate for June fell to 4 percent from 4.1 percent last month. Private-sector employment rose by 206,000, and government employment fell by 195,000 in June, largely because of the expiration of temporary jobs held by census workers.
The report also said that so far this year, the number of private-sector jobs has increased by an average of 177,000 per month, compared with 202,000 per month for all of 1999, which indicates that the economy may be slowing somewhat. That's good news for stocks because it means the Federal Reserve may be less inclined to raise interest rates when it meets August 22.
Armed with the report, investors pushed the Nasdaq composite index up 62.63 to 4,023.20, the first time it has closed above 4,000 since April 11. The Standard & Poor's 500 index climbed 22.23 to 1,478.90.
The Dow Jones industrial average gained 154.51 to close at 10,635.98, led by Home Depot, which rose $4.13 to $55.38.
For the week, the Nasdaq and S&P 500 were little changed from last week's close of 3,966.11 and 1,454.60, respectively. The Dow gained almost 2 percent for the week.
"If you're an investor or a trader, you can't wait for everything to be neatly laid out for you. You have to take a shot," said Larry Wachtel, a market analyst at Prudential.
"And today, people are taking the shot that the Fed will leave interest rates alone in August," he said. Interest rates will be safe if the numbers continue to come out like this, he added.
"Even though the economy is slowing, there was a drop in available workers and wage (growth) acceleration," she said. "The markets might need more than a slowdown to take the pressure off the labor market."
The employment report showed "a sharp slowdown from the previous trend," Banc of America Securities chief economist Mickey Levy said. "The key issue now is retail and housing sales in the coming months."
Among widely held tech stocks, Intel closed up $2.69 at $139.31. Microsoft gained $1.06 to $82.
The CNET tech index rose 52.47 to close at 2,849.92. Winners outpaced losers, with 65 of the 94 stocks in the index rising, 28 falling and one remaining unchanged.
Of the 18 sectors tracked, PC hardware makers gained the most, climbing about 5 percent. Companies that provide services to the Internet sector fell 2 percent, posting the sharpest drop of all sectors.
Negative earnings news from Brio Technology made it the largest percentage loser on the Nasdaq. The shares fell $11.34, or 57 percent, to $8.47 on a volume of 16.6 million shares, more than 55 times the stock's average.
Yahoo shares fell $5.88 to $116.50 after an analyst downgraded the stock on revenue concerns.
The Philadelphia semiconductor index rose 41.32, or nearly 4 percent, to 1,160.42, led by chipmaker National Semiconductor, which gained $4.50, or 9 percent, to close at $54.
Shares of optical equipment maker Sycamore Networks rose $16.75, or 15 percent, to $126.94. The company disclosed a new pact to supply telecommunications network operator 360networks with up to $420 million worth of gear over the next several years, its largest contract to date.