NEW YORK, Aug 5 (Reuters) - Wall Street stocks headed lower, Treasury yields rose and the dollar rallied after the U.S. July employment report blasted past expectations, raising the odds of continued monetary tightening from the Federal Reserve.
All three major U.S. stock indexes were 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 odds of further rate increases at the Fed's next meeting in September.
Even so, the S&P 500 and the Nasdaq remained on course to notch their third consecutive weekly gains.
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.
"This is very hot employment data," said Peter Cardillo, chief market economist at Spartan Capital Securities in New York. "It means the Fed is going to continue to raise interest rates. Bonds are getting crushed. Stocks are coming down."
The Dow Jones Industrial Average fell 51.89 points, or 0.16%, to 32,674.93, the S&P 500 lost 9.27 points, or 0.22%, to 4,142.67 and the Nasdaq Composite dropped 32.77 points, or 0.26%, to 12,687.81.
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 0.38% and MSCI's gauge of stocks across the globe shed 0.20%.
Emerging market stocks rose 0.72%. MSCI's broadest index of Asia-Pacific shares outside Japan closed 0.62% higher.
Benchmark 10-year notes last fell 46/32 in price to yield 2.8415%, from 2.676% late on Thursday.
The 30-year bond last fell 79/32 in price to yield 3.0894%, from 2.961% late on Thursday.
The dollar sharply extended its gains against a basket of currencies in the wake of the employment report.
The dollar index rose 0.86%, with the euro down 0.7% to $1.0171.
The Japanese yen weakened 1.74% versus the greenback at 135.27 per dollar, while sterling was last trading at $1.2059, down 0.81% on the day.
Crude prices reversed earlier losses after the employment report eased recession fears.
U.S. crude rose 1.72% to $90.06 per barrel and Brent was last at $95.47, up 1.43% on the day.
Gold dipped as waning recession fears tarnished the safe-haven metal's luster.
Spot gold dropped 0.8% to $1,776.89 an ounce.
(Reporting by Stephen Culp; additional reporting by Elizabeth Howcroft in London; Editing by Susan Fenton)