NEW YORK ( TheStreet) -- The major U.S. stock finished their second best day of trading this year after investors celebrated an unexpected drop in the unemployment rate to its lowest level in almost three years.

The Dow Jones Industrial Average closed 156.8 points higher, or 1.2%, at 12,862. The S&P 500 advanced 19.4 points, or 1.5%, to 1,345. The Nasdaq gained 46 points, or 1.6%, to 2,906, pushing the week's gains to 3.2% -- the best weekly performance in two months.

Only three components of 30 on the Dow traded lower. Bank of America ( BAC), Alcoa ( AA)and Caterpillar ( CAT)led the Dow higher. Merck ( MRK), Procter & Gamble ( PG) and Pfizer ( PFE) were slipping 0.1% , 0.7% and 0.1%.

The Bureau of Labor statistics announced Friday morning that the U.S. economy added 243,000 jobs in January to push the unemployment rate down to 8.3%, the lowest level since February 2009. Economists had expected the addition of 150,000 new jobs last month, and for the unemployment rate to remain unchanged at 8.5%.

The number of jobs added in December was also upwardly revised to 203,000 from 200,000, while November's figures were boosted to 157,000 from 100,000.

"Virtually every economist on the planet had expected a drop in the rate of job gains in January which makes today's upward surprise even more surprising," said Dan Greenhaus, chief global strategist at BTIG. "Job growth at this pace and declines of this magnitude in the unemployment rate, if continued, would absolutely and unquestionably take a third round of quantitative easing from the Federal Reserve off the table."

"Everyone coming into 2012 said there would be continued volatility but so far that has not transpired," said Hank Smith, chief investment officer with wealth management firm Haverford. " Today's job's number was such a thoroughly good number that you couldn't complain about it... Europe's been in the news for 18 to 20 months. The shock value is lessening."

Stocks in Europe added to earlier gains, with Germany's DAX closing up 1.7% and London's FTSE up 1.8%. Greece and its European creditors are expected to wrap up talks about a fresh bailout plan in coming days which would involve private creditors taking more than a 70% loss on their holdings.

Japan's Nikkei Average settled down 0.5% and Hong Kong's Hang Seng gained 0.1%.

In corporate news, Micron ( MU) shares were halted after the semiconductor company's CEO, Steve Appleton, died in in a small plane crash in Boise, Idaho. He was 51 years old.

Panasonic ( PC) cautioned investors that it may be heading toward a record loss of 780 billion yen ($10.2 billion) on weak TV and mobile phone sales and restructuring costs related to the acquisition of Sanyo Electronics. Panasonic said it will see 514 billion yen in restricting costs, as well as a 250 billion yen writedown from the 2009 acquisition of Sanyo. The shares advanced 3.2% to $8.11.

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