For investors, jobs report is good news

— -- The stronger-than-expected July jobs report is a good thing for stock investors. For bond investors? Not so much.

After the report came out Friday, major stock indexes surged. The Standard and Poor's 500 stock index surged 25.99 points, closing at 1,390.99, a 1.9% gain.

The good news: The economy added 163,000 jobs in July, the best showing in five months. Most economists expected about 100,000 new jobs.

The report is one more piece of good news for the economy, says Maury Harris, chief U.S. economist for UBS. Several retailers, including Ross Stores and TJX, reported better-than-expected sales for July, and the University of Michigan's consumer confidence survey improved as well.

More jobs means more consumer spending, and two-thirds of the economy depends on consumers. People who are worried about keeping their jobs spend less, and when jobs begin to seem plentiful, they're more inclined to open their wallets.

More consumer spending spells better earnings for consumer stocks, as well as leisure and hospitality stocks — think hotels and cruises. Biggest industry leaders Friday: Home builders, up 5.9%, advertisers, up 5.6%, and home entertainment, up 5.3%, according to Bloomberg.

But one good jobs number doesn't mean everyone can relax. The number will be revised next month. George Feiger, CEO of Contango Capital Advisors, says 160,000 new jobs in a workforce of more than 100 million isn't that spectacular.

The stock market still has to worry about Europe and the so-called fiscal cliff — the possibility that taxes will rise and federal spending will be slashed if Congress fails to act by Dec. 31.

"The worries about Europe will just continue," Harris says. "But one way or another, we'll have less political gridlock after the November election. I don't doubt that some businesses have been holding back on hiring because of that."

The stronger-than-expected report could be a slight negative for the stock market, because it reduces the chance that the Federal Reserve will start another round of quantitative easing to push interest rates down further and stimulate the economy. If the economy grows on its own, it might not need another booster shot from the Fed.

"It's like your mom telling you that if you don't gain weight, she'll start feeding you Twinkies," Stovall says. You ight be more excited about the Twinkies than the benefits of gaining weight.

But the jobs report wasn't so strong as to preclude any Fed action. After all, the overall unemployment rate rose to 8.3% in July from a revised 8.2%. And, says Sam Stovall, chief market strategist for S&P Capital IQ: "A rational investor would prefer a growing economy over additional stimulus."

The bond market, which is only happy when it rains, sold off on Friday. Bond prices rise — and yields fall — when the economy looks weak. The yield on the 10-year Treasury note rose to 1.57% from 1.48% Thursday.

The jobs report wasn't strong enough that you should sell your bond funds. But it's a warning sign that now is not the time to load up on bond funds, no matter how well they have done the past few years.

If the economy continues to improve, interest rates will rise, and the principal value of your bond fund shares will fall. While you'll get higher interest payments, those won't be as much as your share-price declines.