Late Buying Lifts Dow Past 8000

Updated from 4:11 p.m. EDT

Stocks in New York had an erratic session Friday, but closed higher, as a late rally in the banks helped offset a jobs report that showed U.S. unemployment at the highest level in a quarter century.

The Dow Jones Industrial Average climbed 39.51 points, or 0.5%, to 8017.59, its first close above 8000 since Feb. 9. The S&P 500 gained 8.12 points, or 1%, to 842.50, and the Nasdaq added 19.24 points, or 1.2%, to 1621.87.

For the week, the Dow rose 3.1%, the S&P 500 added 3.3%, and the Nasdaq added tacked on 5%.

The financials rallied in the final hour of trading to lead the Dow, with Bank of America ( BAC) adding 5%. JPMorgan Chase ( JPM) and Citigroup ( C) rose 4% each.

Equities were initially weak after the U.S. government said that nonfarm payrolls decreased by another 663,000 in March and that the unemployment rate rose to 8.5% from 8.1%.

Job losses were widespread across the major industry sectors, according to the report from the Labor Department. Around 5.1 million jobs have now been lost since the recession began in December 2007, almost two-thirds of those in the last five months.

The number of people who have been jobless for 27 weeks or more, which is considered long-term, rose to 3.2 million. There were roughly 1.9 million long-term unemployed workers at the beginning of the recession. The numbers, which equate to the highest unemployment rate since 1983, were essentially in line with expectations.

"I think what we are looking for as a market is a deterioration of the rate of decline in the unemployment situation, a slowing of the acceleration," says Linda Duessel, equity market strategist at Federated Investors. "We need to see it moderating."

Hugh Johnson, chief investment officer at Johnson Illington Advisers, says it was hard to find anything good in the report. "They paint the same gloomy picture, or tell us the economy as measured by payrolls was in a deep recession in the first quarter. The message in the markets recently is that although the economy may remain in a recession for the next few quarters, it's not likely to be as severe."

The next big catalyst for the stock market will be first-quarter earnings, not so much for what they reveal about the first quarter but for the outlooks, Duessel says.

Alcoa ( AA) will kick off the earnings season next Tuesday.

Overall, the expectation is for the first quarter to possibly be the worst of the year, with some gradual improvement in the second quarter, followed by growth in the latter half of the year, says Michael Sheldon, chief market strategist at RDM.

"If that forecast is accurate, the odds seem to be increasing that we're probably at the trough or the lowest point in terms of job losses, and we should start to see slightly better news as we go through the next few months or so." On the other hand, anything that changes that forecast would be a clear negative, he says.

One bright spot Friday was Research In Motion ( RIMM), whose shares surged 20.8% to $59.29 after the company topped first-quarter estimates .

Other tech names were also higher, with Google ( GOOG) rising 2% to $369.78 after reports that it's in discussions to buy Twitter for more than $250 million.

Meanwhile, IBM ( IBM)could finalize an acquisition of Sun Microsystems ( JAVA) as early as next week, according to reports. IBM rose 1.4% to $102.22, while Sun Microsystems gained 3.4% to $8.49.

Elsewhere, Federal Reserve Chairman Ben Bernanke , speaking at a credit market symposium, discussed how the Fed is using its balance sheet to heal the economy. Bernanke remarked that some of its programs, including the Term Asset-Backed Securities Loan Facility, or TALF, are expected to grow in the coming months.

Overseas, the Nikkei and Hang Seng closed higher by 0.3% and 0.2%, respectively. The Dax in Frankfurt added 0.1%, while London's FTSE 100 lost 2.3%.

Checking in on commodities, crude oil fell 13 cents to settle at $52.51 a barrel after rising early, while gold declined $11.60 to $897.30 an ounce.

Longer-dated Treasuries were dropping, with the 10-year down 1-2/32 to yield 2.9%. The 30-year was falling 1-25/32 and yielding 3.7%. Ratings, recently cited for Best Stock Selection from October 2007 through February 2009 , is an independent research provider that combines fundamental and technical analysis to offer investors tremendous value in volatile times. To see how your portfolio can use this research, click here now!