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Richard Drew, Associated Press
Trader Ryan Falvey, foreground right, works on the floor of the New York Stock Exchange Friday, Aug. 3, 2012. U.S. stocks are rising sharply on Wall Street after a July jobs report revealed the strongest hiring trends in five months.

NEW YORK — Like rain after a long drought, the stock market surged Friday after four days of losses as the government reported a sharp pickup in hiring by U.S. employers in July.

The Dow Jones industrial average shot up 218 points to 13,096 as of 11:20 a.m. The broader Standard & Poor's 500 index rose 25 points to 1,389, and the Nasdaq composite added 60 points to 2,970.

Markets had been slumping all week after central banks in the U.S and Europe took no new action to shore up the economy, as investors had hoped.

The Labor Department's closely watched monthly jobs report gave investors assurance that the U.S. economy may be doing better all on its own.

U.S. employers added 163,000 jobs last month, the government reported, a sharp turnaround following months of sluggish hiring. Between April and June, the economy added an average of just 75,000 jobs a month compared with 226,000 jobs per month in the first three months of the year.

"It's one step forward," said Joe Bell, senior equity analyst at Schaeffer's Investment Research. "But we would like to see continued improvement in the labor market in coming months."

There was also some good news from the service sector, a broad part of the economy that includes financial services such as banking, retail, health care and utilities.

The Institute for Supply Management reported that U.S. service companies grew at a slightly faster pace in July, with a reading of 52.6. Any reading above 50 indicates expansion.

The benchmark 10-year Treasury note was yielding 1.55 percent, up from 1.48 percent on Thursday. Bond yields rise when investors move money out of low-risk assets like U.S. government debt.

Oil prices also rose as investors became more optimistic about the economy following the jump in hiring by U.S. employers. Benchmark crude shot up $2.76 to $89.96 on the New York Mercantile Exchange.

Despite the gain in hiring, there were still enough signs of weakness in the latest jobs report to keep hope alive that the Federal Reserve may still take more steps to kick-start the economy at its next meeting in September. A separate survey of households by the Labor Department found that the unemployment rate rose to 8.3 percent in July from 8.2 percent in June.

At the end of a two-day policy meeting this week, the Fed said it would take action on the economy "as needed to promote a stronger economic recovery." Also on Thursday, the European Central Bank dampened investors' mood when it didn't provide details on how it plans to tackle the continent's debt crisis.

Several U.S. companies also turned in strong earnings reports. Procter & Gamble, which makes Tide, Bounty, NyQuil and many other consumer products, reported a 45 percent surge in quarterly earnings, easily beating Wall Street's forecasts. P&G's stock rose $1.54 to $65.06.

Other stocks making big moves included:

— Knight Capital jumped 77 cents to $3.35. The trading firm responsible for the stock market disruptions Wednesday morning obtained an emergency credit line, according to news reports. Knight said the losses, which were caused by a software glitch, will cost it $440 million. The stock had fallen 75 percent over the previous two days.

— LinkedIn shot up $13.55 to $107.06. The social media company reported that its second-quarter revenue increased faster than analysts had expected. LinkedIn also raised its full-year revenue forecast.

— EOG Resources soared $9.20 to $105.33. The energy company that was spun off from Enron more than a decade ago reported that its income rose 34 percent after its oil production rose in the last three months.