Wall Street was so bullish on Friday that it could have passed for Pamplona. Stock markets surged, hitting their highest levels since autumn as investors took in the news that the economy shed only 247,000 jobs in July, its smallest losses in nearly a year. And the American International Group, a black hole of losses and government bailouts, said Friday that it had turned a profit. Investors abandoned the safety of government bonds and rolled the dice with riskier junk bonds. 'The recession is dead,' Dean Maki, an economist at Barclays Capital, declared in a research note. 'Long live the recovery.' With consumer stocks leading the way, the Dow Jones industrial average rose 113.81 points, or 1.2 percent, to 9,370.07, while the wider Standard & Poor's 500-stock index hit its highest levels since early October and was up 1.34 percent, or 13.40 points, at 1,010.48. The Nasdaq was 1.37 percent, or 27.09 points higher at 2,000.25. Shares of the Walt Disney Co. finished 5.2 percent higher, Nordstrom closed up 8.2 percent and J.C. Penney 9.7 percent. Shares of hotel chains, office suppliers and banks all bounded higher on investor optimism. And shares of AIG continued to rise. The stock closed up 20.5 percent after rising 63 percent on Wednesday and 2.4 percent on Thursday. Shares, which started the week at $13.14, closed Friday at $27.14. For most of the last year, the government's monthly snapshot of job losses has been a dreary day, one that reminds investors that consumers were worried, that employers were still cutting costs and that a drop in spending might hamper a recovery. But Friday's figures offered a rare glint of optimism. The unemployment rate dropped for the first time since April 2008, falling to 9.4 percent from 9.5 percent. While that decrease actually reflected the more ominous trend of unemployed workers dropping out of the labor force, the headline decline in the unemployment rate and payroll job losses raised expectations that the economy was turning around. 'No one really knows what kind of expansion we'll have,' said Stu Schweitzer, global markets strategist at JPMorgan Private Bank. 'One thing is clear: Having cut costs to the bone, any increase in revenue should drop straight through to the bottom line of corporate America.' But businesses and workers are continuing to struggle, notwithstanding the improving jobs numbers and some outsize profits at banks like Goldman Sachs. Economists still expect unemployment to reach 10 percent before it recedes, and many predict that businesses will be slow to create nearly enough jobs to replace the 6.7 million positions lost during this recession. Consumer spending, which makes up most of the American economy, dropped 1.2 percent in the second quarter, and may remain low if jobs do not return. 'The behavior of the consumer is now the key thing to watch,' Schweitzer said. And for companies, second-quarter earnings on the S&P 500 are down 31 percent from last year, a nearly identical drop as the first quarter, according to Bloomberg data. And as markets keep veering higher, some analysts are bracing for a correction. While some market-watchers are already running with the bulls, Tudor Investment Corp., the hedge fund, said the recent gains in stocks represented a 'bear market rally.' The Treasury's 10-year note fell 25/32, to 94 4/32. The yield rose to 3.85 percent, from 3.75 percent late Thursday. 