The major equity indexes rebounded on Friday to close at their highest levels in two weeks after a strong jobs report and assurances from Federal Reserve Chairman Jerome Powell that the central bank would be patient and flexible in steering the course of interest rates.

In a session emblematic of the elevated volatility that has gripped markets for weeks, all three major equity indexes surged more than 3 percent in one of the broadest advances in years. The gains more than wiped out the previous session’s losses and were led by the technology sector, which bounced back from its largest one-day decline in more than seven years after Apple cut it sales outlook.

Since hitting a 20-month low on Christmas Eve just a rounding error from levels considered to be a bear market, the S&P 500 Index has now gained 7.7 percent. Friday’s advance, measured by the number of stocks rising versus those falling, was the broadest in more than eight years.

The main catalysts for the surge were the jobs report, which exceeded forecasts with the largest number of jobs created in 10 months. Add in the comments by the Fed’s Powell and it was all go.

In remarks to the American Economic Association, Powell soothed market nerves with assurances that the central bank is sensitive to risks that worry investors and is not on a preset path of interest rate hikes.

Speaking after months of volatility in world bond and stock markets, Powell avoided some of the communication missteps that in the past have roiled rather than calmed investors. He also pledged to stay in his post even if asked to quit by President Donald Trump, who has repeatedly chastised the man he put in the job over the Fed’s repeated rate hikes.

News that China and the United States would hold trade talks in Beijing next week helped tariff-vulnerable industrials lead the Dow’s rally, headed by Caterpillar, United Technologies, 3M and Boeing.

All 11 major sectors of the S&P 500 ended the session in positive territory, with technology, communications services, materials and industrial stocks seeing the largest percentage gains.

Apple shares rose 4.3 percent and led the tech sector’s advance as the company began to recover ground lost after warning of a holiday quarter revenue shortfall on Wednesday.

Each of the FAANG momentum stocks, a group that includes Facebook, Apple, Amazon. Netflix and Alphabet traded higher. Netflix rose 9.7 percent after Goldman Sachs added the streaming service to its “conviction list.”

Approximately 8.68 billion shares changed hands on the major domestic equity exchanges, a number that was comparable to the 9.14 billion share average over the past 20 trading days.

Jobs Number and Unemployment Both Rise

The upbeat employment report from the Labor Department on Friday stood in stark contrast with reports this week showing Chinese factory activity contracting for the first time in 19 months in December and weak manufacturing across much of Europe and Asia.

Concerns about the economy gained momentum by surveys showing sharp declines in consumer confidence and manufacturing activity last month. Both were red flags that the economic expansion, now in its ninth year and the second longest on record, is losing steam.

Meanwhile, today’s report showed nonfarm payrolls increasing by 312,000 jobs last month, the largest gain since February, as employment at construction sites snapped back after being restrained by unseasonably cold temperatures in November. There were also broad gains in hiring last month.

Data for October and November were revised to show 58,000 more jobs added than previously reported. The economy created 2.6 million jobs last year compared to 2.2 million in 2017.

Average hourly earnings rose 11 cents, or 0.4 percent, in December after gaining 0.2 percent in November. That lifted the annual increase in wages to 3.2 percent, matching October’s gain, from 3.1 percent in November.

The unemployment rate increased to 3.9 percent from a near 49-year low of 3.7 percent in November as a strong labor market lured some jobless Americans from the sidelines. The labor force participation rate, or the proportion of working-age Americans who have a job or are looking for one, rose to 63.1 percent last month from 62.9 percent in November. The December jobs gain pushed total employment above 150 million jobs for the first time.

The Labor Department has not been affected by the partial shutdown of the U.S. government and will continue to publish economic data compiled by its statistics agency, the Bureau of Labor Statistics.

The strong employment report likely keeps the Federal Reserve on course to continue raising interest rates this year. The Fed last month forecast two rate hikes this year and signaled its tightening cycle is nearing an end in the face of financial market volatility and slowing global growth.

At the same time, the financial markets are projecting no rate hikes in 2019. In the latest signal that investors see little room for the Fed to lift rates any further, yields on 2-year Treasury notes below the Fed’s policy rate on Thursday for the first time in more than a decade.

The S&P 500 index suffered its worst December since the Great Depression and tumbled on Thursday after Apple slashed its holiday-quarter revenue forecast, saying sales in China slowed more than expected.

Growth forecasts for the fourth quarter are around a 2.6 percent annualized rate, with risks tilted to the downside amid fading stimulus from the Trump administration’s $1.5 trillion tax cut package, a trade war with China and policy uncertainty in Washington.

The economy grew at a 3.4 percent pace in the third quarter. It needs to create roughly 100,000 jobs per month to keep up with growth in the working-age population.

With the labor market viewed as at or beyond full employment, job growth is expected to slow this year as workers become scarcer. Anecdotal evidence has been growing of companies experiencing difficulties finding workers and raising wages to retain and attract employees.

There are concerns that tightening financial market conditions because of the steep stock market sell-off could hurt hiring. The government shutdown, if it extends beyond next week, could weigh on January payrolls.

Hiring last month rose across all sectors. Retail employment increased by 23,800 jobs. Employment at construction sites rebounded last month, with companies hiring 38,000 employees after adding no workers in November.

Manufacturing payrolls increased by 32,000 jobs in December but could surprise on the downside after a measure of factory employment fell last month.

Professional and business services employment increased by 43,000 jobs last month and government payrolls rose 11,000.

Citi Sees Equities Returning 14 Percent in 2019

According to Citi recession fears are overblown although you can look for lower EPS growth.

Fears of a recession are overdone and 2019 should only see a slowdown in earnings-per-share growth, according to Citigroup Inc., advising investors to buy the dip in equities.

The bank sees returns of 14 percent for the next 12 months, as their “bear-market checklist” shows just 3.5 red flags out of a possible 18. Citi’s target number for the S&P 500 index is 2850 for a 14 percent gain.

It also expects earnings per share at global companies to grow an average 4 percent in 2019. While that estimate is below the consensus of 7 percent, it’s better than the 4 percent contraction being priced into markets now.

Citi recommended a balanced approach to sector exposure, with a mix of cyclical and defensive equities. The bank now has an overweight rating on communication services and health care in the defensive space and picked industrials as the preferred cyclical sector. 

Energy, financials, materials and information technology are rated neutral, while consumer staples, utilities and consumer discretionary remain underweight.