* Jobs data adds to view U.S. economy is gaining strength
* US dollar firms vs major currencies, down against euro
* Treasuries rebound; oil up in choppy trade (Recasts and updates with price moves)
By Barani Krishnan
NEW YORK, April 1 (Reuters) - U.S. blue chip stocks opened the second quarter on Friday by hitting their highest level since June 2008 as investor optimism rose after an upbeat U.S. employment report.
The Dow Jones industrial average <.DJI> climbed above the 12,400 mark on views the U.S. economy is on a solid recovery track.
The government reported a second straight month of solid job gains in March and a slight drop in the unemployment rate to a 2-year low.
The dollar initially rose against the euro after the report but turned negative after a senior Federal Reserve official cautioned against views the March job numbers might cause the Fed to reverse course.
A total of 216,000 nonfarm U.S. jobs were added in March, well above the 190,000 expected in a Reuters poll, and January and February figures were revised to show 7,000 more jobs than previously reported. The unemployment rate fell to a two-year low of 8.8 percent. For details, see [ID:nNOAT00477]
Analysts said the data signaled that recovery in the world's largest economy remained firmly on track.
"It's hard to argue with the case that we have further to go in this bull market economic recovery cycle," said Hugh Johnson, chief investment officer of Hugh Johnson Advisors LLC in Albany, New York.
Around 1 p.m. EDT (1700 GMT), the Dow Jones industrial average <.DJI> was up 83.67 points, or 0.68 percent, The Standard & Poor's 500 Index <.SPX> was up 9.92 points, or 0.75 percent, at 1,335.75. The Nasdaq Composite Index <.IXIC> was up 16.76 points, or 0.60 percent, at 2,797.83.
Global stocks, as measured by the MSCI All-Country World Index <.MIWD00000PUS>, rose 0.92 percent.
The improving jobs picture initially helped the U.S. dollar
gain against a basket of major currencies <.DXY >, as well as
the euro
New York Federal Reserve Bank President William Dudley said economic recovery was not looking as good as a month ago, and while jobs numbers were encouraging, he did not want to overstate the growth.
Markets have been getting mixed signals from various Fed officials over the past two weeks on growth and whether the central bank is keen to keep the easy monetary policy it has maintained since the financial crisis or is looking to raise interest rates soon.
"I would be surprised if we didn't finish the full QE2," Dudley said, referring to the central bank's $600 billion buying program, which some other Fed officials have indicated could be ended prematurely.
OIL REBOUNDS
While many analysts viewed the U.S. job figures as encouraging, some expressed concern that rising energy and commodity prices could squeeze investments in business expansion, threatening the employment outlook.
"One has to wonder whether we'll see the pace of hiring slow as a result," said Bernard Baumohl, chief global economist at the Economic Outlook Group in Princeton, New Jersey.
London Brent crude futures rose more than $1 per barrel to $118.03 a barrel by 12:33 p.m EDT (1633 GMT) in choppy trading, after the jobs report. Brent had risen 2.0 percent on Thursday, hitting 2-1/2 year highs.
U.S. copper's benchmark contract May
TREASURIES RISE
U.S. Treasuries erased early losses after the remarks by Dudley, who also said the nation was still "very far away" from achieving the dual mandate of maximum sustainable employment and price stability.
"One side of the Fed's mandate, falling unemployment, is saying exit. The other side of their mandate, low core inflation, is saying not so fast," said Chris Rupkey, chief financial economist at Bank of Tokyo/Mitsubishi UFJ in New York.
Benchmark 10-year Treasury notes were unchanged on the day, yielding 3.47 percent after being down 10/32 right after the employment report. U.S. federal fund futures were slightly lower, with the January 2012 contract down 3 ticks at 99.645.
Safe-haven gold