By Avantika Chilkoti, Akane Otani and Joanne Chiu

U.S. stocks rose Friday, extending gains after data showed the economy defied expectations to add jobs in May.

The S&P 500 gained 2%, while Dow Jones Industrial Average climbed 2.6%, or 678 points. The tech-heavy Nasdaq Composite Index gained 0.9%.

The Labor Department said the labor market added 2.5 million jobs in May. Economists surveyed by The Wall Street Journal had expected a loss of 8.3 million jobs. The unemployment rate also fell in the Labor Department's latest reading, clocking in at 13%, compared with estimates of 20%.

All together, the report suggests the economy is recovering faster than many had expected from the fallout caused by the coronavirus pandemic.

Investors have been betting that the country will be able to both contain the spread of the coronavirus and reopen businesses in the coming months.

"The market is focused on the speed and method of reopening and taking comfort from China where you've seen a resumption that is pretty quick," said Thushka Maharaj, global multiasset strategist at J.P. Morgan Asset Management.

Job cuts have been focused in sectors like services and temporary work, where jobs are traditionally cut -- and re-added -- relatively swiftly, Ms. Maharaj added.

"Re-employing in these sectors does happen organically and you would expect that as reopening happens in earnest some of these jobs will come back," she added.

The recent stock-market surge was partly driven by massive stimulus, plus optimism over "the loosening of restrictions across the world and the expectations that we could see a V-shaped recovery," according to Daryl Liew, chief investment officer at REYL Singapore.

"However, we haven't really seen that in the broader economy yet," Mr. Liew said, adding that further government intervention might be needed to support businesses if activity doesn't rebound by the third quarter.

Elsewhere, the Stoxx Europe 600 benchmark rose 1.7%, lifted by gains among bank stocks.

On Thursday, the European Central Bank scaled up its bond-buying program, while Germany adopted its second economic-stimulus package since the start of the coronavirus pandemic.

"It's a step in the right direction from the European leaders and shows some unity," said Brian O'Reilly, head of market strategy for Mediolanum International Funds. Rising bond yields help banks, which borrow short-term to lend long-term, boosting profitability.

In Asia, Hong Kong's Hang Seng benchmark rose 1.7% and South Korea's Kospi rallied 1.4%.

Write to Avantika Chilkoti at Avantika.Chilkoti@wsj.com, Akane Otani at akane.otani@wsj.com and Joanne Chiu at joanne.chiu@wsj.com

(END) Dow Jones Newswires

June 05, 2020 09:48 ET (13:48 GMT)

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