By Yashaswini Swamynathan
(Reuters) - U.S. stocks surged on Friday, with the S&P 500 touching a record intraday high after a second straight month of robust labor market data boosted optimism about the economy.
The U.S. Labor Department report showed that nonfarm payrolls rose by 255,000 in July, far exceeding estimates of 180,000.
While unemployment rate remained unchanged at 4.9 percent, it stayed below the 5 percent mark associated with full employment. Average hourly wages rose by 8 cents.
The S&P 500 touched 2,180.78, its ninth record intraday high since July.
"(The data) cements the view that the economy is improving despite the recent negative news from GDP," said Aaron Kohli, an interest rate strategist at BMO Capital Markets in New York.
The data also suggests that the April and May jobs data was an aberration and that June was more consistent with what is going on in the economy, he said. The June employment number was revised up to 292,000 from 287,000.
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However, inflation running below the Fed's 2 percent target and weaker-than-expected GDP growth amid global uncertainty could deter the central bank from pulling the trigger in the near term.
The chances of a rate hike doubled to 18 percent for September after the jobs report and rose to 40 percent from 29.4 percent for December, according to CME Group's FedWatch tool. Those numbers, however, do not rise significantly even until July next year.
"I'm not sure this (jobs data) is enough to move the needle in either direction for the Fed," said Curt Long, chief economist at National Association Of Federal Credit Unions in Washington.
At 10:59 a.m. ET (1459 GMT), the Dow Jones Industrial Average was up 151.38 points, or 0.82 percent, at 18,503.43.
The S&P 500 index was up 15.55 points, or 0.72 percent, at 2,179.8.
The Nasdaq Composite was up 55.06 points, or 1.07 percent, at 5,221.30.
Seven of the 10 major S&P 500 sectors were higher, led by a 1.52 percent surge in the financials index. The sector was trading at its highest level since the start of the year.
Banks, which stand to gain if the Fed raises rates, were among the biggest drivers of the S&P. JPMorgan, Bank of America and Citigroup rose about 3 percent.
Bristol-Myers plunged 17 percent after its lung cancer drug failed in a late-stage study, while Merck, which makes a rival drug, rose 6 percent.
Bristol-Myers was the biggest drag on the S&P, while Merck gave the index its biggest boost.
Advancing issues outnumbered decliners on the NYSE by 2,016 to 802. On the Nasdaq, 1,895 issues rose and 718 fell.
The S&P 500 index showed 25 new 52-week highs and no new lows, while the Nasdaq recorded 87 new highs and 17 new lows.
(Reporting by Yashaswini Swamynathan in Bengaluru; Editing by Anil D'Silva)