Dollar rallies, U.S. yields spike after jobs data

Fri Jul 5, 2013 12:43pm EDT
 
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By Rodrigo Campos

NEW YORK (Reuters) - Wall Street stocks rose in volatile trading on Friday, while the dollar rallied and Treasury debt prices fell after strong U.S. job market data showed the world's largest economy on a solid footing.

U.S. jobs growth was better than expected in June and the two previous months of gains were revised higher. U.S. bond yields are up sharply, hitting levels not seen since August 2011, as this report increases the likelihood that the U.S. Federal Reserve will begin cutting its massive monetary stimulus, known as quantitative easing, as early as September.

"The sentiment was already positive heading into this report. I think the markets were braced for an upside surprise, and I think this exceeded even that optimism," said Scott Brown, chief economist at Raymond James in St. Petersburg, Florida.

Non-farm payrolls increased by 195,000 in June and the unemployment rate held steady at 7.6 percent as more people entered the workforce. Prominent economists at Goldman Sachs and JPMorgan revised previously held views on the Fed, as they now believe bond-buying will be reduced beginning in September.

The Dow Jones industrial average .DJI rose 82.56 points or 0.55 percent, to 15,071.11, the S&P 500 .SPX gained 9.72 points or 0.6 percent, to 1,625.13 and the Nasdaq Composite .IXIC added 23.05 points or 0.67 percent, to 3,466.72.

MARKETS SEE FED POLICY CHANGE

The strong data increased expectations of a Fed move to adjust the pace of bond purchases that has helped support the economy, sending benchmark U.S. 10-year Treasury yields to a high of 2.719 percent, the highest in almost two years.

The five- and seven-year yields were also at highs not seen in nearly two years.   Continued...

 
Electronic information boards display market information at the London Stock Exchange in the City of London January 2, 2013. REUTERS/Paul Hackett