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NEW YORK (CNNMoney) -- Stocks rallied nearly 2% Friday as investors welcomed a stronger-than-expected July jobs report.
The Dow Jones industrial average surged 220 points, or 1.7%. The S&P 500 and the Nasdaq were both up almost 2%.
The U.S. economy added 163,000 jobs in July, an improvement from an increase of just 64,000 in June, according to a government report. Economists surveyed by CNNMoney were predicting 95,000 jobs were added last month.
"It was the perfect number for the market," said Mark Luschini, chief investment strategist at Janney Montgomery Scott.
The improvement in hiring was enough to "demonstrate the positive, albeit lackluster, underpinnings of the economy," said Luschini. At the same time, he added, it was not strong enough "for the Fed to put its gun back in its holster."
The Federal Reserve disappointed some investors Wednesday, when it left its economic policies unchanged. However, the Fed indicated the U.S. economy is slowing and that more action could be in the cards soon.
Many investors expect Fed chairman Ben Bernanke to hint at the possibility of more stimulus at the central bank's annual symposium later this month in Jackson Hole, Wyo. The Fed could then follow up by announcing a third round of asset purchases in September.
Meanwhile, worries about the global economy persist, even more so after central bankers in the United States and Europe failed to take any simulative action this week.
In the corporate world, shares of Knight Capital Group (KCG) rebounded 20%, after plummeting to near $2 a day earlier.
After a costly high-frequency trading mishap Wednesday, Knight is now the subject of takeover talks. The Wall Street Journal reported that Knight told its clients it had secured a line of credit to keep operating through Friday.
U.S. stocks ended in the red Thursday, after European Central Bank president Mario Draghi stopped short of announcing immediate action to contain Europe's debt crisis at the conclusion of an ECB meeting.
World markets: European stocks rose in afternoon trading. Britain's FTSE 100 added 1.9%, the DAX in Germany gained 3.3% and France's CAC 40 gained 3%.
Asian markets ended mixed. The Shanghai Composite rose 1.0%, while the Hang Seng in Hong Kong slipped 0.1% and Japan's Nikkei lost 1.1%.
Economy: The Institute for Supply Management said its index of activity in the services sector increased to 52.6 in July from 52.1in June.
The index was expected to come in at 52.3, according to a survey of analysts by Briefing.com.
Companies: LinkedIn (LNKD) shares jumped after the business networking site reported sales that nearly doubled from a year ago, led by a huge increase in revenue for its job posting services.
Facebook (FB) jumped on the tech bandwagon. Shares gained in early trading, following six straight days of losses.
Shares of Procter & Gamble (PG, Fortune 500) rose in early trading after the consumer products company topped earnings expectations. Revenues were in line with expectations.
NYSE Euronext (NYX)'s quarterly results beat Wall Street's earnings and revenue forecasts.
Currencies and commodities: The dollar fell against the euro and British pound, but rose slightly versus the Japanese yen.
Oil for September delivery rose $1.96 to $89.09 a barrel.
Gold futures for August delivery rose $2.60 to $1,593.30 an ounce.
Bonds: The price on the benchmark 10-year U.S. Treasury fell, pushing the yield up to 1.56% from 1.48% late Thursday.
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