Stocks appeared to be hard at work on a rally for most of the day, despite an industrial-strength jobs report. But given the session's featherweight volume, most traders said the upside was merely masking an extended coffee break.

Before the market opened, the

Labor Department

reported that the U.S. unemployment rate fell to 3.9% in April, matching a January 1970 low. Economists polled by

Reuters

had expected the rate to drop to 4%. After some flip-flopping in the futures markets, stocks leapt higher when the market opened.

The

Dow Jones Industrial Average

climbed 165.37, or 1.6%, to 10,577.86, regaining less than half of the nearly 400 points it surrendered in the previous three trading sessions. The

Nasdaq Composite Index

rose 96.58, or 2.6%, to 3816.82, helped by gains in semiconductor and biotech stocks. The small-cap

Russell 2000

gained 10.93, or 2.2%, to 512.84, while the broader

S&P 500

sailed up 23.06, or 1.6%, to 1432.63.

"Once the initial selloff was contained at the lows of the

Globex

session, there was some short-covering, and some folks on the sidelines felt, 'We might as well try to run this thing up,'" said Bill Meehan, chief market analyst at

Cantor Fitzgerald

. Things pretty much quieted down about two hours into trading though, he said. Nearing the end of trading, he said, "breadth and volume are nothing to write home about."

"It looks pretty good, but there is a whole lot of nothing going on," said Jay Meagrow, vice president of trading at

McDonald

in Cleveland. Indices "are exaggerated to the upside on very light volume," he said. Referring to the upcoming

Federal Open Market Committee meeting May 16, Meagrow said, "This meeting will be big. That is all anybody is going to talk about."

Indeed, there was a sense that the strong employment data helped lock in the possibility of a 50-basis-point hike in the

fed funds rate at the next meeting. Oddly enough, that news seemed to alleviate some of the fear and uncertainty pressuring the market in the past week.

At this point, some believe anything less than a half-point hike could confuse the market. Meehan believes that a mere quarter-point hike might "break" the market. On the sense that the

Fed is not being as pre-emptive as needed. "The assumption is that the Fed will have everything under control. If they did something that led the bond market to believe they are not acting appropriately, or there is an opinion that they're behind the curve," on inflation, it could shake confidence, he said.

On the other hand, he said it is possible a half-point hike could even be followed by an intermeeting hike if the market takes off too soon. "If they raise 50 basis points on May 16 and Wall Street says, 'Hey, this is a lot of fun,' and starts to rally, what you have left is

Greenspan wondering what it may take to rein things in," he said.

With

retail sales and the

Producer Price Index on the way, the overall feeling is that volatile price swings are practically a given next week.

Rate-Sensitive Stocks Hold Firm

For today, at least, interest-rate-sensitive stocks held up well, with

American Express

(AXP) - Get Report

up 1% and

Merrill Lynch

(MER)

moving up 4.2%.

Chase Manhattan

(CMB)

dipped 1.5% while

J.P. Morgan

(JPM) - Get Report

inched 0.2% lower. The

American Stock Exchange Broker/Dealer Index

edged up 0.8% while the

Philadelphia Stock Exchange KBW/Bank Index

rose 0.4%.

Cyclicals were mixed with the

Dow Jones Transportation Average

cruising up 81.15, or 2.9%, to 2876.11 while the

Dow Jones Utility Average

nosed down 2.53, or 0.9%, to 318.26.

Technology stocks were higher across the board .

TheStreet.com Internet Sector

index rose 8.19, or 0.9%, to 897.76, helped by strength in

Amazon.com

(AMZN) - Get Report

, up 6.2%, and

CMGI

(CMGI)

, up 3.5%.

Semiconductor stocks were strong, with the

Philadelphia Stock Exchange Semiconductor Index

up 1.6%. Chip giant

Intel

(INTC) - Get Report

rose 3.2% while

Advanced Micro Devices

(AMD) - Get Report

gained 2.5%.

Biotechs, which Meehan called a measure of "speculative juices," bounced a bit with the

Nasdaq Biotechnology Index

up 4.4%.

Amgen

(AMGN) - Get Report

added 3, or 5.3%, to 59 9/16 while

Genentech

(DNA)

hopped 4 15/16, or 4.2%, to 123 15/16.

The 10-year Treasury fell 14/32 to 99 29/32, pushing the yield up to 6.511%.

For the week, the Dow was down 1.5%, while the Nasdaq Composite lost 1.1%. The broader S&P 500 dipped 1.4%, while the Russell 2000 moved up 1.3%. The

Dow Jones Transportation Average

gained 0.9% while the Dow utilities edged up 0.2%. The

American Stock Exchange Composite Index

rose 0.7% and the DOT moved up 0.3%.

Market Internals

Breadth was positive on both exchanges on lighter-than-usual volume.

New York Stock Exchange:

1,667 advancers, 1,241 decliners, 800.5 million shares. 70 new 52-week highs, 54 new lows.

Nasdaq Stock Market:

2,262 advancers, 1,675 decliners, 1.18 billion shares. 33 new highs, 63 new lows.

For a look at stocks in the news, see the Company Report, published separately.