Wall Street slips despite U.S. jobs data; bond prices rise

Reuters
Updated

By David Gaffen

NEW YORK (Reuters) - Wall Street shares slipped and investors retreated to long-dated government debt on Friday, as enthusiasm over strong U.S. jobs growth was undercut by flat wages and a decline in the number of people looking for work.

Global market indexes ended the week flat. The MSCI All-World Index <.MIWD00000PUS> was barely changed Friday, but ended the week up 1.1 percent.

The U.S. economy added 288,000 jobs in April, more than expected. Even so, the report raised some concerns as more than 800,000 people left the U.S. labour force and average hourly wages were unchanged in April.

"The market perceives the unemployment numbers as good on quantity but bad on quality," said Guy Lebas, chief fixed-income strategist at Janney Montgomery Scott in Philadelphia.

Traders also said that news on more violence in eastern Ukraine sparked a shift into the bond market that pushed the yield on the 30-year note to lows not seen since last June.

Pro-Russian rebels shot down two Ukrainian helicopters on Friday, killing two crew members, while Moscow accused Kiev of wrecking hopes of peace by launching a "criminal" assault to retake the separatist-held town of Slaviansk.

"Geopolitical tension has come back into the market. You're going into a weekend and obviously events can unfold so you've got profit-taking," said Quincy Krosby, market strategist at Prudential Financial, based in Newark, New Jersey.

Selling in U.S. Treasuries was modest in short- and medium-dated notes as investors responded to an increased likelihood of interest-rate hikes from the Federal Reserve. Investors moved into longer-dated Treasuries, pushing down their yields, on views that the economy is still not strong enough to spark inflation.

The three-year Treasury note was down 2/32 in price to yield 0.875 percent, while the 30-year bond, after an earlier selloff, rose 30/32 in price, lowering its yield to 3.365 percent.

The jobs figures bumped up the odds of the Federal Reserve raising interest rates sooner in 2015, with expectations for a rate increase by June 2015 increasing to about 56 percent from 47 percent a day earlier.

U.S. stocks slipped after an early rally. The Dow Jones industrial average <.DJI> fell 45.98 points, or 0.28 percent, to 16,512.89, the S&P 500 <.SPX> lost 2.54 points, or 0.13 percent, to 1,881.14, and the Nasdaq Composite <.IXIC> dropped 3.554 points, or 0.09 percent, to 4,123.897..

In the currency market, the dollar edged lower against the yen and was flat against the euro .

Among commodities, oil rose after Thursday's declines. U.S. crude futures gained 41 cents to $99.83 a barrel while Brent crude rose 79 cents to $108.55.

Gold rose by $14.65 to $1,298.14, while copper, whose industrial uses make it sensitive to growth expectations, gained 1.1 percent.


(Additional reporting by Marc Jones in London; Editing by Meredith Mazzilli and Leslie Adler)