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

Fri May 2, 2014 11:33am EDT
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By David Gaffen

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

Traders also cited headlines on more violence in eastern Ukraine as sparking a shift into the bond market.

The U.S. economy added 288,000 jobs in April, more than expected. Strong as the headline figure was, the report raised some concerns as more than 800,000 people left the U.S. labor 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.

Selling in U.S. Treasuries was modest in short- and medium-dated notes as investors responded to the increased likelihood of interest-rate hikes from the Fed. However, long-dated bond yields fell, which reflects a view that the economy is still not strong enough to spark inflation.

The five-year Treasury note was down 2/32 to yield 1.677 percent, while the 30-year bond, after an earlier selloff, turned around to rise 16/32 to lower its yield to 3.389 percent.

The jobs figures bumped up the odds on the Federal Reserve raising rates sooner in 2015, with the 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 S&P 500 began the day not far from its all-time closing high of 1890.90 reached on April 2 but traded mostly flat on Friday.   Continued...

Traders work on the floor of the New York Stock Exchange April 11, 2014. REUTERS/Brendan McDermid