US STOCKS-Jobs data optimism fuels Wall St rally

* Broad rally hinges on hopes for big jobs growth

* Oil falls on profit taking, market eyes Libya plan

* Options market more cautious, investors eye hedges

* Indexes up: Dow 1.6 pct, S&P 1.7 pct, Nasdaq 1.8 pct

* For up-to-the-minute market news see [STXNEWS/US]
(Updates to close)

By Angela Moon

NEW YORK, March 3 (Reuters) – Investors betting on a big
gain in U.S. payrolls pushed Wall Street to its best one-day
rally in three months on Thursday, but weak volume lingers as a
concern for those hoping for another leg higher.

As oil paused from its recent climb, the market’s focus
shifted to stronger-than-expected economic data a day before
the February U.S. employment report.

The median estimate is for a gain of 185,000 jobs,
according to economists polled by Reuters, but market sentiment
was leaning toward a number above 200,000, traders said.

“There are still concerns about high oil prices but the
bottom line is, the U.S. economy is improving. We continue to
get confirmations of that, and it’s a good sentiment heading
into Friday’s numbers,” said Ryan Detrick, technical analyst at
Schaeffer’s Investment Research in Cincinnati, Ohio.

The Dow Jones industrial average (.DJI: Quote, Profile, Research) was up 191.40
points, or 1.59 percent, at 12,258.20. The Standard & Poor’s
500 Index (.SPX: Quote, Profile, Research) was up 22.53 points, or 1.72 percent, at
1,330.97. The Nasdaq Composite Index (.IXIC: Quote, Profile, Research) was up 50.67
points, or 1.84 percent, at 2,798.74.

The Dow and S&P 500 posted their biggest one-day gains
since Dec. 1.

However, volume continued to be below average on days when
the market rallies, causing some traders to be skeptical about
the durability of the rally. About 7.81 billion shares traded
on the New York Stock Exchange, NYSE Amex and Nasdaq, below
last year’s daily average of 8.47 billion.

The put-to-call ratio in the options market also didn’t
change much despite the day’s rally as traders continued to
hedge against a potential drop in the market.

“As much as investors are excited about a pullback so that
they can jump in, they are just as concerned about how quickly
this market can turn,” Detrick said.

Initial jobless claims fell last week to 368,000 — a 2-1/2
year low — one day after a robust report on private-sector
hiring. For details, see [ID:nOAT004756]

The Institute for Supply Management’s non-manufacturing
index rose to 59.7 in February, slightly above forecasts and
higher than the January result. [ID:nEAP101300]

Industrial stocks led the market higher, boosted by a
weaker dollar and an improving outlook for global demand. The
S&P industrial index (.GSPI: Quote, Profile, Research) gained 2.4 percent, with
Caterpillar Inc (CAT.N: Quote, Profile, Research) up 3.2 percent to $104.25.

Stocks have shown resilience in the face of economic
headwinds. The broad S&P 500 is down only about 1 percent from
a peak in late February after falling around 3 percent due to
growing violence in oil-producer Libya.

The Arab League said a peace plan for Libya was under
consideration. The plan put forth by Venezuelan President Hugo
Chavez, if successful, could remove a major headwind for
equities. [ID:nLDE72200E]

Oil prices retreated from near 2-1/2 year highs. Brent
crude futures (LCOc1: Quote, Profile, Research) fell $1.56 to settle at $114.79 after
Venezuela’s proposed plan to end Libya’s crisis set off

Several top U.S. retailers posted bigger-than-expected
sales gains for February. The S&P retail index (.RLX: Quote, Profile, Research) rose 1.2
percent. [ID:nN03203429]
(Reporting by Angela Moon, Editing by Kenneth Barry)