The Labor Department said Friday employers cut 651,00 jobs last month, and the unemployment rate jumped to 8.1 percent. The government also upwardly revised its December and January job loss figures to 681,000 and 655,000, respectively.
The readings were worse than analysts' estimates. Many market participants, however, had braced for even grimmer data, shorting stocks earlier in the week. To short a stock means to bet it will fall.
Wall Street had "anticipated bad news, and we got it," said Rob Lutts, president of Cabot Money Management.
The market has been plummeting this week through barrier after barrier - the Standard & Poor's 500 index tumbled more than 4 percent Thursday to its lowest close since September 1996.
Though stocks might bounce Friday given how far they've fallen, many analysts believe there is little keeping them from sinking further.
"My sense is we haven't discounted all the negatives out there as of yet," Lutts said. He added that investors have to account for not only the gloomy data from the government and companies, but also the pessimism of other participants in the market.
"It's not a scientific process by which stock prices are set," he said. "They're set by people. People are extremely emotional beings."
In early trading, the Dow Jones industrial average rose 91.12, or 1.38 percent, to 6,685.56. The Standard & Poor's 500 index rose 9.31, or 1.36 percent, to 691.86, and the Nasdaq composite index rose 10.01, or 0.77 percent, to 1,309.60.
The Russell 2000 index of smaller companies rose 5.34, or 1.53 percent, to 354.79.
The Dow and S&P were down nearly 25 percent year-to-date as of Thursday's close. Thursday's selloff came as China shot down the market's hope for additional stimulus, Citigroup Inc. stock dropped below $1 a share, and worries escalated about a possible General Motors Corp. bankruptcy.
As banks anticipate more loan losses this year, they are slashing their dividends. Following last week's move by JPMorgan Chase & Co. to cut its dividend to 5 cents a share, Wells Fargo & Co. on Friday lowered its own quarterly dividend to 5 cents a share from 35 cents. Citigroup and Bank of America Corp. had already slashed their quarterly dividends to a penny per share.
Wells Fargo shares rose $1.23, or 15 percent, to $9.35.
Government bond prices turned lower. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 2.87 percent from 2.81 percent late Thursday. The yield on the three-month T-bill, a popular safe haven for anxious investors, rose to 0.22 percent from 0.20 percent.
Gold prices advanced as the dollar weakened against other major currencies.
Light, sweet crude rose $1.68 to $45.29 a barrel in electronic pre-market trading on the New York Mercantile Exchange.
Asian markets, which closed before the U.S. jobs report was released, declined. Japan's Nikkei stock average fell 3.50 percent, and Hong Kong's Hang Seng index fell 2.37 percent.
European markets were mixed. Britain's FTSE 100 rose 0.78 percent, Germany's DAX index rose 0.59 percent, and France's CAC-40 fell 0.12 percent.
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