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U.S. stocks slip, Treasury yields rise and dollar rallies after robust U.S. jobs report

Fri, 5th Aug 2022 20:25

NEW YORK, Aug 5 (Reuters) - The S&P 500 headed lower, Treasury yields rose and the dollar rallied on Friday after the U.S. July employment report blasted past expectations, raising the odds of continued monetary tightening from the Federal Reserve.

Nasdaq joined the bellwether index in the red, while 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. That increased the likelihood of more aggressive rate increases from the Fed in September.

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 market’s initial reaction was negative, based on the concern that the Fed may have to raise (interest) rates more going forward," said Tim Ghriskey, senior portfolio strategist Ingalls & Snyder in New York.

"That has evolved throughout the day and now we’re seeing the view that increased employment is beneficial to the economy," Ghriskey added. "And while the Fed will have to continue its hawkish policy, the economy will be able to stay out of recession."

The Dow Jones Industrial Average rose 8.39 points, or 0.03%, to 32,735.21, the S&P 500 lost 17.28 points, or 0.42%, to 4,134.66 and the Nasdaq Composite dropped 103.44 points, or 0.81%, to 12,617.14.

European shares fell after the U.S. jobs data fueled expectations for a 75 basis point rate hike at the Federal Reserve's September meeting.

The pan-European STOXX 600 index lost 0.76% and MSCI's gauge of stocks across the globe shed 0.37%.

Emerging market stocks rose 0.73%. MSCI's broadest index of Asia-Pacific shares outside Japan closed 0.6% 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 Fed in September.

Benchmark 10-year notes last fell 44/32 in price to yield 2.836%, from 2.676% late on Thursday.

The 30-year bond last fell 63/32 in price to yield 3.0629%, from 2.961% late on Thursday.

The dollar rallied against a basket of currencies in the wake of the employment report.

The dollar index rose 0.85%, with the euro down 0.61% to $1.0181.

The Japanese yen weakened 1.57% versus the greenback at 135.03 per dollar, while sterling was last trading at $1.207, down 0.72% on the day.

While the strong labor data helped crude prices advance, they remained on course to end the week near multi-month lows due to lingering recession fears.

U.S. crude rose 0.53% to settle at $89.01 per barrel, while Brent 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 dropped 1.0% to $1,773.48 an ounce.

(Reporting by Stephen Culp; additional reporting by Elizabeth Howcroft in London; Editing by Susan Fenton and Chizu Nomiyama)

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