Federal Reserve Chairman Jerome Powell said the central bank can be patient as it assesses risks to a USA economy and will adjust policy quickly if needed, but made clear he would not resign if President Donald Trump asked him to step aside.
The Fed, which hiked benchmark USA interest rates four times previous year including in December, is however not on a preset path and could pause policy tightening as it did in 2016 when global growth concerns led to doubts about the US economic recovery, he said.
Powell's comments relieved fears that the Fed may be making a policy error by tightening too fast.
The rose 3.29%, more than 746 points, more than recouping its losses from the day before. Furthermore, Fed Chair Powell also said that rate hikes would continue to be gradual and data dependent.
Earlier on Friday, the Labor Department reported that nonfarm payrolls jumped by 312,000 jobs, well above market expectations, while wages and labour force participation rose, all signals of sustained economic strength.
Earlier, stock markets were buoyed by news that China and the United States will hold trade talks in Beijing on Monday and Tuesday.
At the time, Powell said there was a "fairly high degree of uncertainty" about the future of further rate hikes, but not that rates have effectively arrived at the lower-end range of neutral. Powell said he did not think the latter was having much impact on markets, but that the strategy would be changed if it started interfering with the bank's broader goals of maintaining strong employment and stable inflation.
That news, coupled with a strong jobs report, sent stocks rocketing up.
"A solid set of job numbers and some comfortable words from the chairman of the Federal Reserve have been just the ticket to get markets into bullish mode", said Chris Beauchamp, chief market analyst at online trading platform IG.
He added that, if needed, "we are always prepared to shift the stance of policy and to shift it significantly". The stock market has seen stomach-churning declines since October, a development that Trump has blamed on the Fed's continued rate hikes, although the president's trade dispute with China as well as concerns about global economic growth also played a part in the market volatility.
The pace of Fed rate hikes and the lowering of the balance sheet, which tends to put upward pressure on interest rates, had both been concerns of investors in recent months.
The Fed had increased the size of its balance sheet four-fold to a record $4.5 trillion in an effort to push long-term interest rates lower.
The question about Powell's possible departure arose after Trump expressed disagreement with the Federal Reserve's monetary policy to increase interest rates and the chairman's work overall.
In response to the observation that the Treasury issues more securities when the Fed's balance sheet holdings mature, Powell said, "We don't believe our issuance is an important part of the story in the market turbulence that began in the fourth quarter of a year ago".