Traders work on the floor at the New York Stock Exchange, May 3, 2013. REUTERS/Brendan McDermid. (BRENDAN MCDERMID/REUTERS)

Fueled by signs of improvement in the labor market, stocks marched into record territory Friday, continuing a year-long rise that has defied expectations.

The latest rally was kicked off by government data showing the economy added 165,000 jobs last month — far more than analysts expected.

The labor and housing markets are showing signs of improvement, giving investors renewed confidence that the recovery, while weak, is here to stay, stock analysts said.

The Dow Jones industrial average, an index of 30 blue chip stocks, and the broader S&P 500-stock index both rose about 1 percent yesterday to close at record highs, 14,973.96 and 1614.42 respectively.

The Dow also traded above 15,000 for the first time — a psychological barrier that comes just two months after it reclaimed the all-time high it lost after the 2008 financial crisis. The Nasdaq Composite Index climbed 30 points, or 1 percent, to close at 3378.63. European markets also saw a big day; the German DAX rose 2 percent to close at a record high of 8122.29.

With markets trading at record levels, the question for investors has become: How long will the rally last?

Stocks could surge well into the summer, analysts say, so long as interest rates remain low and there are no economic surprises. The Federal Reserve committed this week to keeping interest rates unchanged.

Low rates also mean investors have few options with their money even if they decide to cash in, analysts said. The bond market is not attractive, and neither is a savings account.

“Investors feel like they have nowhere else to go,” said Sam Stovall, chief equity strategist at S&P Capital IQ. “That’s another reason stocks are doing well.”

The market rally sapped demand for government bonds. The yields for 10- and 30-year bonds both rose Friday, indicating investors were seeking higher returns.

Analysts cautioned that people should treat the rally as a good sign, but not pay attention to record-shattering numbers.

“The number is the number. That doesn’t matter from a substance standpoint, but it matters from a psychological standpoint,” said Bernie McGinn, a portfolio manager at Alexandria-based Union Street Partners Value Fund.

Markets reach new levels

The road to recovery remains bumpy, analysts warned, especially as markets remain vulnerable to budget debates in Washington and concerns about the global economy. In a forecast released Friday, the European Commission said the continent’s economy is expected to decline further this year.

Commodities also rallied on the jobs numbers, with crude oil touching a one-month high and copper prices increasing by 6 percent.