The broad-based gains on solid trading volume also sent the Dow Jones industrial average near a four-year high. The S&P 500 extended its 2012 advance to about 7 percent and was at its highest level in more than six months.

The U.S. economy created jobs at the fastest pace in nine months in January and the unemployment rate dropped to nearly a three-year low of 8.3 percent, the government said.

"It is really hard to find something not to like in the jobs report," said Andrew Goldberg, market strategist at JP Morgan Funds in New York. "There is genuine strength in this report with broad-based jobs creation."

While the news was positive, it will take more months of substantial job gains to maintain momentum in a market that has risen more than 25 percent since October lows.

"There is no doubt that no matter how good this report is, this is still a lukewarm jobs recovery," Goldberg said. "There is a long way to go for this economy."

More than 450 stocks across all sectors hit 52-week highs, including Apple (AAPL.O), United Parcel Service (UPS.N), Yum Brands (YUM.N) and MasterCard (MA.N). The number of NYSE stocks making new 52-week highs was at it highest since July.

Wayne Kaufman, chief market analyst at John Thomas Financial in New York, said he was having a hard time identifying stocks that did not show signs of being overextended.

"Seventy four percent of stocks are over their own 200-day moving average. Those are bull-market statistics," he said.

Consumer discretionary shares and other stocks tied to an expanding economy led gains. Financial shares .GSPF rose 2.7 percent, while industrials .GSPI and discretionaries .GSPD added 1.7 percent to 2 percent.

In another report signaling strength, the pace of growth in the services sector unexpectedly accelerated in January to its highest level in nearly a year.

The Dow Jones industrial average .DJI gained 156.82 points, or 1.23 percent, to 12,862.23. The Standard & Poor's 500 Index .SPX rose 19.36 points, or 1.46 percent, to 1,344.90. The Nasdaq Composite Index .IXIC added 45.98 points, or 1.61 percent, to 2,905.66.

Signs of an improving economy and an absence of bad news from Europe have helped Wall Street stocks rally since last year. But analysts caution that the market is still susceptible to risks such as a flare-up in Europe's debt crisis or geo-political uncertainty in the Middle East that could generate an oil price shock.

For the week the S&P ended up 2.2 percent for its fifth week of gains in a row. The Dow rose 1.6 percent and the Nasdaq also advanced for a fifth straight week, up 3.2 percent for the best week since early December.

The S&P Small Cap 600 .SML hit an all time high.

Nonfarm payrolls jumped 243,000, the Labor Department said, as factory jobs grew by the most in a year. The jobless rate fell to 8.3 percent - the lowest since February 2009 - from 8.5 percent in December.

"The real stimulant to future economic growth is the 'boost in confidence' this report provides to the roughly 92 percent of the work force which already has a job," said Jim Paulsen, chief investment strategist at Wells Capital Management in a research note.

Four stocks rose for each one that fell on both the Nasdaq and NYSE. Volume on the NYSE, Amex, and Nasdaq was 8.03 billion shares, more than the daily 200-day moving average of 7.75 billion.

More than half way through the earnings season, 60 percent of S&P 500 companies that have reported have beaten expectations

according to Thomson Reuters I/B/E/S data.

Gilead Sciences (GILD.O) was one of the top gainers on the S&P 500, up 10.9 percent to $54.69 a day after announcing promising early results from a trial of a hepatitis C drug. It also posted adjusted fourth-quarter profit below consensus.

(Reporting by Edward Krudy; Editing by Kenneth Barry)

• A Permanent Economic Emergency