Market expectations for a Fed rate cut in June rose to 27.5% from 16.7% after the data release, according to the CME Group's FedWatch tool. The market is also pricing in a 79% chance of lower Fed rates by July.

"The market's got a conundrum here. That's a bad report. Just on the report itself, I think people would want to sell the market. However, the fact that it really makes the case for a rate cut, I think is why you're seeing the market hang in there," said JJ Kinahan, chief market strategist at TD Ameritrade.

The U.S. economy added 75,000 jobs in May , marking the second time in four months that jobs growth totaled less than 100,000. Economists polled by Dow Jones expected an increase of 180,000 jobs. Wage growth also slowed.

The Dow Jones Industrial Average closed 263.28 points higher at 25,983.94, led by gains in Microsoft and Apple. The climbed 1% to 2,873.34 as the tech sector outperformed. The Nasdaq Composite gained 1.7% to 7,742.10.

Stocks jumped on Friday, building on strong weekly gains, as weak economic data increased the odds of easier monetary policy from the Federal Reserve.

Traders work on the floor of the New York Stock Exchange.

The weak jobs number gives the Fed "a clear easing path by July," billionaire investor Stanley Druckenmiller told CNBC's "Squawk Box" before the jobs report was released.

Treasury yields fell broadly, with the benchmark 10-year rate dropping to its lowest level since 2017. The dollar slid against a basket of currencies.

Apple shares rose more than 2.5% along with Microsoft. For the week, Apple soared more than 8% while Microsoft gained 6.3%.

Bank shares followed yields lower. Citigroup, J.P. Morgan Chase and Bank of America all fell more than 1%.

The major indexes posted sharp gains for the week. The Dow jumped 4.7%, its biggest weekly gain since November. It also snapped a six-week losing streak. The S&P 500 and Nasdaq were up 4.4% and 3.9% this week, respectively.

Fed Chair Jerome Powell said Tuesday the central bank is "closely monitoring the implications of these developments for the U.S. economic outlook and, as always, we will act as appropriate to sustain the expansion."

"You're seeing this view to price in cuts, that things are going to be worse later this year, that the Fed is going to have to quickly change its cycle again, and that puts Powell in a tough bind here," said Erik Bregar, head of FX strategy at the Exchange Bank of Canada. "In December, they were still talking rate hikes and now they've got to flip around to pandering to the market's want for cuts."

"There's this view that Powell is going to come in for the rescue and it's lifting everything," he said. "The punch bowl is back in play."

Investors also kept an eye on trade as talks between U.S. and Mexico officials continue.

Mexican ambassador to the U.S. Martha Barcena Coqui told CNBC that negotiations involved a "very good discussion." Mexico has also agreed to send its national guard to its border with Guatemala to stem the flow of undocumented migrants hoping to reach the U.S., Reuters reported Thursday.

President Donald Trump tweeted "there is a good chance" the two countries can make a deal. This would keep the administration from slapping a 5% tariff on all Mexican imports into the U.S.

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