As European markets surged higher one day after the deadly terrorist bombings in London, Wall Street welcomed the Labor Department's jobs report. While the 146,000 jobs created in June were less than the 195,000 economists hoped for, the unemployment rate fell to 5 percent from 5.1 percent in May, and hourly earnings rose 0.2 percent.

Combined with falling oil prices, the employment news was enough to encourage Wall Street's two main camps. Those who fear inflation were happy with only a modest rise in job growth and wages, while those worried about a severe slowdown in the economy could point to another sign of steady, if slower, growth.

The move higher capped a remarkable week on Wall Street, which saw fear of rising oil priced replaced by a surprising resolve in the wake of the terror attacks in London.

"I think the shock of $60 oil has worn off and the market is focusing on the jobs report," said Russ Koesterich, senior portfolio manager at Barclays Global Investments in San Francisco. "It's also encouraging that you've had resiliency in the face of both terrorism and oil prices."

The Dow rose 146.85, or 1.43 percent, to 10,449.14.

Broader stock indicators also moved sharply higher. The Nasdaq composite index climbed 37.22, or 1.79 percent, to 2,112.88, it's highest level since Jan. 3. The Standard & Poor's 500 index was up 13.99, or 1.17 percent, at 1,211.86.

The bond market dropped sharply as stocks rose. The yield on the 10-year Treasury rose to 4.11 percent from 4.06 percent late yesterday. The dollar made gains against other major currencies, while gold prices fell after climbing yesterday in the wake of the terror attacks.

Oil prices moved lower in afternoon trading after rising past $61 per barrel as Hurricane Dennis threatened oil rigs and refineries in Florida and the Gulf of Mexico. A barrel of light crude settled at $59.63, down $1.10, on the New York Mercantile Exchange.

Worries over oil dominated stock trading in the first part of the holiday-shortened week, with oil prices setting new record highs. But while Wall Street initially sank yesterday after the London bombings, the markets were in positive territory by session's end — defying conventional wisdom.

Analysts were encouraged by the market's performance over the last two sessions, which helped push the major indexes into positive territory for the week. The Dow gained 1.41 percent for the week, while the S&P was up 1.46 percent and the Nasdaq surged 2.7 percent.

"I think, all told, you're seeing the markets welcome rationality," said Joseph Battipaglia, chief investment officer at Ryan Beck & Co. "The markets behaved very rationally after the London attacks, and even with oil rising because of hurricane season, the markets are accepting that as just a fact of life. With a backdrop of good economic news here, stocks look attractive."

In corporate news, Alcoa Inc. kicked off the second-quarter earnings season late yesterday, posting a 14 percent rise in profits and beating Wall Street's earnings forecasts by a penny per share. Alcoa rose $1.11 to $27.20.

Next week will bring the first big wave of earnings reports, including Apple Computer Inc. and General Electric Co. The bulk of reports, however, will be released during the following two weeks.

Technology consulting firm Accenture Ltd. climbed $2.01 to $24.21 after it reported a strong rise in second-quarter profits. The company surpassed analysts' expectations by 8 cents per share.

Siebel Systems Inc., the business software maker, said revenues for the second quarter would be lower than expected due to sluggish sales. Siebel fell 20 cents to $8.59.

Advancing issues outnumbered decliners by more than 3 to 1 on the New York Stock Exchange, where volume came to 1.46 billion shares, compared with 1.52 billion on yesterday.

The Russell 2000 index of smaller companies was up 12.84, or 1.98 percent, at 662.14.

Overseas, London's FTSE 100 surged 1.43 percent, nearly making up all of yesterday's losses. Other European markets likewise recovered, with Germany's DAX index rising 1.5 percent, and France's CAC-40 gaining 1.89 percent. Japan's Nikkei stock average fell 0.21 percent for the session.