By Angela Moon

NEW YORK (Reuters) - Stocks rose sharply on Friday after robust jobs data pointed to economic growth and investors overcame concerns that the Federal Reserve may begin scaling back its stimulus efforts as soon as September.

After choppy trading through much of the session, which was marked by light volume, stocks extended gains in late afternoon, pushing the benchmark S&P 500 index (^GSPC) to close above the its 50-day moving average for the first time since June 19.

The government's report on non-farm payrolls showed employers added 195,000 jobs in June, exceeding expectations of 165,000. Job growth in previous months also was revised higher.

For the holiday-shortened week, the Dow rose 1.5 percent, the S&P 500 was up 1.6 percent and the Nasdaq composite advanced 2.2 percent.

At first some investors saw the jobs data as increasing chances the Fed would cut its stimulus efforts sooner than expected. But the market recovered smartly as investors took the view that the data was a positive sign for the economy, with sectors tied to the pace of growth leading the way upward.

Whether the jobs report "will stop the FOMC from the onset of its tapering process remains to be seen. However, we are trying, at the suggestion of the Federal Reserve, to ignore the latest single data point" and take a longer view about the economy, said Andrew Wilkinson, chief economic strategist at Miller Tabak & Co in New York.

The Dow Jones industrial average (^DJI) was up 147.29 points, or 0.98 percent, at 15,135.84. The Standard & Poor's 500 Index (^GSPC) was up 16.48 points, or 1.02 percent, at 1,631.89. The Nasdaq Composite Index (^IXIC) was up 35.71 points, or 1.04 percent, at 3,479.38.

Small-cap shares and banks rallied, giving credence to the idea that investors were viewing the strong payroll figures positively.

The S&P Small Cap 600 index (.SPCY) rose 1.5 percent to hit a new all-time high of 568.15 while the S&P 500 financial sector index (CME:^SPSY) gained 1.8 percent.

"The jobs report this morning is a sign that the economy is growing and the private sector is hiring, and that bodes well for growth-oriented industries," said Janna Sampson, co-chief investment officer at OakBrook Investments LLC in Lisle, Illinois.

Bank of America Corp (BAC) rose 1.8 percent to $13.06 while Citigroup Inc (NYS:C) gained 1.8 percent to $48.53. Large banks benefit when interest rates rise because higher rates increase their net interest margin.

Interest rates rose sharply on Friday in anticipation that the Fed will start cutting its monthly $85 billion in bond buying, which was a major factor in the stock market's rally this year, as early as September.