S&P 500 dips, Treasury yields rise and dollar rallies following robust U.S. jobs report
By Stephen Culp
NEW YORK, Aug 5 (Reuters) - The S&P 500 headed lower, Treasury yields advanced and the dollar rose on Friday after the U.S. July employment report blasted past expectations, raising the odds of continued monetary tightening from the Federal Reserve.
Wall Street pared losses as the session progressed. At close, the Nasdaq joined the bellwether index in the red and the blue-chip Dow reversed course to end in positive territory.
Benchmark U.S. Treasury yields and oil prices headed higher as the stronger-than-expected payrolls data appeared to confirm the economy is not yet in recession, which increased the likelihood of more aggressive rate increases from the Fed in September.
The employment report "telegraphed some work needs to be done on the Fed’s side, regarding their interest rate policy," said Matthew Keator, managing partner in the Keator Group, a wealth management firm in Lenox, Massachusetts. "That was certainly the market’s initial reaction."
The Labor Department's employment report showed the U.S. economy added 528,000 jobs in July, more than double the 250,000 expected, while wage inflation remained hot and the participation rate edged lower.
"The payrolls number are wonderful from a demand standpoint, more people being paid is great for the economy," said Tim Ghriskey, senior portfolio strategist Ingalls & Snyder in New York.
Evidence of economic strength helped ease risk aversion as the week drew to a close.
"The employment data raises the prospect of a soft landing," Keator said, adding that Fed Chair Jerome Powell has "pointed to the fact that a strong labor market has not historically accompanied recessions."
The Dow Jones Industrial Average .DJI rose 76.65 points, or 0.23%, to 32,803.47, the S&P 500 .SPX lost 6.75 points, or 0.16%, to 4,145.19 and the Nasdaq Composite .IXIC dropped 63.03 points, or 0.5%, to 12,657.56.
European shares fell after the U.S. jobs data stoked expectations of continued hawkish Fed policy.
The pan-European STOXX 600 index .STOXX lost 0.76% and MSCI's gauge of stocks across the globe .MIWD00000PUS shed 0.20%.
Emerging market stocks rose 0.75%. MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS closed 0.61% higher.
U.S. Treasury yields rose and a closely watched part of the yield curve touched its deepest inversion since August 2000 on increased odds of another 75 basis point interest rate hike from the central bank in September.
Benchmark 10-year notes US10YT=RR last fell 42/32 in price to yield 2.8287%, from 2.676% late on Thursday.
The 30-year bond US30YT=RR last fell 65/32 in price to yield 3.0662%, from 2.961% late on Thursday.
The dollar rallied against a basket of currencies in the wake of the employment report.
The dollar index .DXY rose 0.84%, with the euro EUR= down 0.63% to $1.0178.
The Japanese yen weakened 1.57% versus the greenback at 135.02 per dollar, while sterling GBP= was last trading at $1.2067, down 0.74% on the day.
While crude prices advanced on the prospect of strong demand, they wrapped up the week near multi-month lows due to lingering recession fears.
U.S. crude CLcv1 rose 0.53% to settle at $89.01 per barrel, while Brent LCOcv1 settled at $94.92 per barrel, up 0.85% on the day.
Gold dipped as waning recession fears tarnished the safe-haven metal's luster.
Spot gold XAU= dropped 1.0% to $1,772.82 an ounce.
Global FX performance Link
Global asset performance Link
Reporting by Stephen Culp in New York
Additional reporting by Elizabeth Howcroft in London
Editing by Chizu Nomiyama and Matthew Lewis
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.