WASHINGTON—Companies ramped up hiring last month and people flooded back into the workforce, a potent mix suggesting the U.S. economy can run strong without overheating and forcing the Federal Reserve to slam its brakes on the expansion with aggressive interest-rate increases.

Investors, applauding the combination of robust economic growth and a restrained central bank, sent the Dow Jones Industrial Average up 440.53 points, or 1.77%, to 25335.74.

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