In a surprising rally, banks stocks surged Friday in spite of strong economic data.

The Labor Department said 310,000 jobs were created in February, more than expected, while unemployment fell to 4.6%, from 4.7%.

But investors shrugged off the report. The reason is that rising labor costs have not translated into price inflation, said chief economist Stuart G. Hoffman of PNC Bank Corp.

Analyst Edward Narjarian of Wheat First Union, Richmond, Va., said investors are more bullish because the yield curve has recently steepened, conveying a "general feeling that banks are going to make their first- quarter numbers."

The Standard & Poor's bank index rose 1.95%, outpacing the Dow Jones industrial average, which climbed 1.48%. The Nasdaq bank index jumped 1.22% and the S&P 500 1.99%.

The biggest gainers of the day included BankBoston Corp., which rose $3.125, to $102; U.S. Bancorp, up $3, to $118; and National City Corp., up $2.25, to $67.375.

J.P. Morgan & Co., which has endured several recent downgrades by credit ratings agencies, also surged. On Thursday, Fitch IBCA became the fourth agency to downgrade the company's debt. Morgan's shares rose $2.125, to $123.6875.

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