U.S. stocks rallied, paring a second straight weekly loss in the Standard & Poor’s 500 Index, as a better-than-forecast payrolls report and expansion in service industries boosted confidence in the world’s largest economy.

The S&P 500 (SPX) rose 1.1 percent to 1,967.9 at 4 p.m. in New York, its best gain in almost two months. The benchmark gauge lost 0.8 percent this week. The Dow Jones Industrial Average climbed 208.64 points, or 1.2 percent, to 17,009.69. TheRussell 2000 Index jumped 0.8 percent, trimming its drop for the week to 1.3 percent. Trading in S&P 500companies was 13 percent above the 30-day average.

“This is considered good news in the market today because it’s been validated by a lot of economic data coming out supporting job growth and economic growth,” Jonathan Corpina, senior managing partner at Meridian Equity Partners who works on the floor of the New York Stock Exchange, said by phone. “I don’t think this changes the Fed’s plans at all.”

Stocks rallied as the U.S. jobless rate declined to a six-year low of 5.9 percent in September and employers added 248,000 in payrolls, followed a 180,000 August increase that was bigger than previously estimated. The median forecast of economists in a Bloomberg survey called for a 215,000 advance.

David Fuller's view

Well, we cannot complain about a lack of Action.  The S&P (daily & weekly) and other leading US stock market indices fell for two weeks, registering upside failures from highs on 19^th September, and accelerated lower on Wednesday and also Thursday morning, before closing almost unchanged for the day.  Friday’s strong rally recouped most of Wednesday’s losses.  The bounce probably included a considerable amount of short covering after the S&P moved closer to its 200-day MA than any small decline since early February. 

The overall uptrend is still intact and the S&P is poised between the roundophobia 2000 region and the last important higher reaction low at 1900.  We will shortly see either uptrend reaffirmation in a sustained push above 2020, or a break beneath the August low and the MA near 1900. 

Which will prevail?  It may be too close to call and we could list lots of other technical, fundamental or geopolitical factors contributing to either trend reaffirmation or deterioration, without solving the riddle at this time.  Meanwhile, there will be plenty of medium-term trend runners who may no longer be adding to their positions in this narrow 120-point range but will not sell without clear evidence of pattern deterioration.  The genius who said: ‘It ain’t over ‘til it’s over’, had a point.  If this is a medium-term top area we may see a few more whipsaws and failed breakouts before the debate is resolved.  Keep an eye on the other US indices, including the Russell 2000, which is a leading indicator to the downside.

As for the Fed and short-term interest rates, Janet Yellen is unlikely to raise them while the US Dollar Index (weekly & daily) is so strong.  Having raced through the 84 region, it is heading for the next resistance points since the credit crisis recession which you can see a little above 88.