U.S. nonfarm payrolls rose by 151,000 jobs in August after an upwardly revised 275,000 increase in July, with job cuts in manufacturing and construction, the Labor Department said. Economists polled by Reuters had forecast payrolls rising by 180,000 last month.
Traders trimmed the probability of a Fed rate hike this month to 21 percent from the 24-percent chance on Thursday, according to CME Group's FedWatch program. However, the odds for a December rate increase edged up to 54.2 percent from 53.6 percent the previous day.
"People are taking a little bit of a relief that it wasn’t a 200,000-plus print, certainly in the equity market," said Sean Lynch, co-head of global equity strategy at Wells Fargo Investment Institute in Omaha.
"Equity markets are going to give the Fed at least one rate increase but if they start to perceive a series of hikes coming, and coming sooner than later, that is when equity markets will get a little nervous here."
Despite the soft report, Richmond Federal Reserve Bank President Jeffrey Lacker on Friday said the U.S. economy appears strong enough to warrant significantly higher interest rates. Lacker argued that a range of economic analysis suggests the Fed's benchmark overnight interest rate is too low.
Several Fed officials have made hawkish comments about a rate hike in recent weeks, leaving investors unable to rule out the possibility of an increase at the central bank's next meeting, scheduled for Sept. 20-21.
The dollar index <.DXY>, which measures the greenback against a basket of six major currencies, bounced back after touching a one-week low to trade up 0.22 percent.
The Dow Jones industrial average rose 72.66 points, or 0.39 percent, to 18,491.96, the S&P 500 gained 9.12 points, or 0.42 percent, to 2,179.98 and the Nasdaq Composite added 22.69 points, or 0.43 percent, to 5,249.90.
For the week, both the Dow and S&P 500 rose 0.5 percent and the S&P gained 0.6 percent.
The energy sector <.SPNY>, up 0.8 percent, helped pace gains as both WTI
Utilities <.SPLRCU>, which benefit from low interest rates, were up 1.2 percent, the best performing of the 10 major S&P sectors.
Advancing issues outnumbered declining ones on the NYSE by a 4.23-to-1 ratio; on Nasdaq, a 2.25-to-1 ratio favored advancers.
The S&P 500 posted 41 new 52-week highs and 2 new lows; the Nasdaq Composite recorded 151 new highs and 18 new lows.- Reuters