Bank stocks and the broader markets rallied Friday on better-than-expected employment numbers.

The KBW Bank Index rose 3.55%, ending the week up 12.39%. The Dow Jones industrial average rose 1.23%, and the Standard & Poor's 500 index 1.34%.

The Labor Department said Friday that U.S. employers cut 247,000 jobs in July and the unemployment rate fell to 9.4%; economists on average had expected 320,000 in job losses and the unemployment rate to rise to 9.6%.

Economists at Wells Fargo Securities wrote in a note Friday that though July's unemployment numbers were encouraging, "there is far less improvement than meets the eye."

"Job losses remain remarkably broad-based, with just 30.1% of the 271 industries adding to their payrolls during the month," the economists wrote. "Even the improvement in the unemployment rate is suspect. The labor force fell much more than household employment, resulting in a drop in the number of unemployed."

There were Gainers across the board.

JPMorgan Chase & Co. rose 4%; Wells Fargo & Co., 2.8%; PNC Financial Services Group Inc., 7.3%; U.S. Bancorp, 3.8%, and Citigroup Inc., 5 cents a share, to $3.85.

However, Bank of America Corp. fell 1.7%.

Among the regionals, SunTrust Banks Inc. rose 4.3%; BB&T Corp., 4.8%; Capital One Financial Corp., 6.2%; Zions Bancorp., 10%; KeyCorp, 3.2%, and Huntington Bancshares Inc., 29 cents, to $4.68 a share.

Colonial BancGroup Inc.'s shares fell 21 cents, to 49 cents, after the Montgomery, Ala., company announced Friday that it was the subject of a criminal investigation by the Department of Justice over alleged accounting irregularities in its mortgage warehouse operations.

Meanwhile, the Alabama State Banking Board is set to ask Colonial on Wednesday to consent to be taken into receivership by the Federal Deposit Insurance Corp., should regulators decide such action is necessary.

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