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Unemployment drop boosts stocks

Unemployment report showing a gain of 216,000 jobs provided a lift for stocks. With unemployment rate at a two-year low, the Dow rose 56 points.

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The payrolls report – showing a gain of 216,000 jobs in March and a decline in the unemployment rate to 8.8 percent – comes against a backdrop of stronger economic growth, even in the face of rising oil prices, said Timothy Speiss, chairman of Personal Wealth Advisors for EisnerAmper.

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"I would say unemployment numbers should continue to trend downward unless gasoline prices approach $4," Speiss said.

The fact the unemployment has already come down to 8.8 percent from 10.1 percent in 2009, is great news, he added.

"It’s not happening fast enough for people," Speiss said, but added he expects the rate with get down to the low 8s by the fall. And that should start to boost housing, one sector of the economy that's lagged, he said.

"If you have declining unemployment, you should see an impact in home acquisitions and reduced foreclosures," Speiss said. "And if you see that occur, then housing prices should start to stabilize."

The number is in line with continuing drops in jobless claims, and a strong private sector payrolls report from ADP on Wednesday.

The strong payrolls report is increasing talk among market participants over when the Federal Reserve will exit its monetary stimulus and when it might raise interest rates.

"Here's the conundrum for traders: As terrific as today's number is, it could also be a reason to worry the Fed will seriously consider an early withdrawal of QE2 and begin talk of higher rates to 'slow the recovery,'" said Todd Schoenberger, managing director of LandColt Trading. "If this happens, then investors will have to refocus their attention to quarterly earnings, which could turn out to be a mixed bag and, therefore, result in a very volatile April for equities."

In fact, the prospect of rising rates is already on the horizon. Richmond Fed President Jeffrey Lacker told CNBC that he "wouldn't be surprised" if the central bank raised interest rates before the year-end.

Raising interest rates and ending asset sales is warranted this year because of concerns about inflation and a need to "normalize interest rates" as the economy improves, said Lacker. But he gave no timetable for the rate hikes or other actions.

On Thursday, Minneapolis Federal Reserve President Narayana Kocherlakota told the Wall Street Journal that the Fed could raise rates by three-quarters of a percentage point by the end of the year.

Oil prices continued to surge on Friday as the rebels lost ground in Libya.U.S. light sweet crude [CLCV1 107.94 1.22 (+1.14%) ] closed above $107 a barrel, after gaining 16 percent in the first quarter and 2.41 percent this week, while London Brent crude [LCOCV1 119.10 1.74 (+1.48%) ]closed above $118, after gaining nearly 24 percent in the first quarter and 2.7 percent this week.

In deal news, Nasdaq OMX andInterContinentalExchange put forth a rival bid to buy NYSE Euronext for about $11.3 billion in cash and stock. The offer is valued at $42.50 per share, a premium of 19 percent to the price proposed by Deutsche Boerse.

Meanwhile, GM U.S. sales for March rose 11.4 percent compared to a year ago. However the figures were less than expected, implying the auto industry recovery may hit a bump in the road with higher gas prices. Rival Ford outsold GM for the second time since 1998 as total sales rose 19.2 percent.

Toyota traded flat after reporting its March sales in the U.S. fell 5.7 percent from a year ago, while Nissan also was flat after reporting a 27 percent boost in March sales.