Stocks jumped on Friday, building on strong weekly gains, as weak economic data increased the odds of easier monetary policy from the Federal Reserve.

The Dow Jones Industrial Average traded 274 points higher, led by gains in Microsoft and Apple. The S&P 500 climbed 1.2% as the tech sector outperformed. The Nasdaq Composite gained 1.6%.

The U.S. economy added 75,000 jobs in May, marking the second straight month of monthly jobs growth below 100,000. Economists polled by Dow Jones expected an increase of 180,000 jobs. Wage growth also slowed.

"The market's got a conundrum here. That's a bad report. Just on the report itself, I think people would want to sell the market. However, the fact that it really makes the case for a rate cut, I think is why you're seeing the market hang in there," said JJ Kinahan, chief market strategist at TD Ameritrade.

Market expectations for a Fed rate cut in June rose to 27.5% from 16.7% after the data release, according to the CME Group's FedWatch tool. The market is also pricing in a 79% chance of lower Fed rates by July.

The weak jobs number gives the Fed "a clear easing path by July, " billionaire investor Stanley Druckenmiller told CNBC's "Squawk Box " before the jobs report was released.

Treasury yields fell broadly, with the benchmark 10-year rate dropping to its lowest level since 2017. The dollar slid 0.5% against a basket of currencies, trading at 96.54.

Bank shares followed yields lower. Citigroup slipped 0.9% while J.P. Morgan Chase and Bank of America slid 1% and 1.2%, respectively.

The major indexes were set to post sharp gains for the week as bets for lower Fed rates increased. The Dow is up 4.7% this week. It was also on pace to snap a six-week winning streak. The S&P 500 and Nasdaq were up 4.5% and 3.8% this week, respectively. They were all on pace to notch their biggest weekly gains since November.

Fed Chair Jerome Powell said Tuesday the central bank is "closely monitoring the implications of these developments for the U.S. economic outlook and, as always, we will act as appropriate to sustain the expansion."

Investors also kept an eye on trade as talks between U.S. and Mexico officials continue.

Mexican ambassador to the U.S. Martha Barcena Coqui told CNBC that negotiations involved a "very good discussion." Mexico has also agreed to send its national guard to its border with Guatemala to stem the flow of undocumented migrants hoping to reach the U.S., Reuters reported Thursday.

—CNBC's Elliot Smith contributed to this report.