Dollar, bond yields jump on robust U.S. jobs data

Fri Feb 6, 2015 4:45pm EST
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By Herbert Lash

NEW YORK (Reuters) - The dollar and U.S. government debt yields jumped on Friday as a strong American labor market report raised expectations that the Federal Reserve will increase interest rates by mid-year.

Wall Street initially rose and European equities hit a seven-year high on the Labor Department report that showed solid U.S. job growth, with wages rebounding strongly. More than one million jobs have been created over the past three months, the first time that has happened since late 1997.

But U.S. stocks sold off in the afternoon on renewed jitters over Greece as a deadline looms next week for the newly elected government to secure a bailout extension.

"There's more loggerheads coming out of the Greece negotiations," said Bucky Hellwig, senior vice president at BB&T Wealth Management in Birmingham, Alabama. "The negotiations on the Greek debt weighed in on the market this afternoon."

Oil futures bounced up from near-six-year lows, but gold XAU= fell more than 2 percent and spot silver XAG= slid 3.7 percent. U.S. Treasury yields rose and the yield curve flattened as traders increased bets the Fed will raise rates by mid-year.

The better-than-expected labor report added to expectations the Fed will begin to raise near-zero interest rates around the start of summer and slammed rate-sensitive securities.

Real estate stocks and the utilities sector .SPLRCU led the decline as their higher yields lose appeal in a rising rate environment, while financials .SPSY gained as they stand to see an increase in profits from higher rates.

Utilities fell 4.13 percent, the biggest single-day drop since August 2011, and financials rose 0.73 percent. One of the biggest percentage losers in the S&P 500 was Simon Properties Group (SPG.N: Quote), which lost 4.0 percent.   Continued...

American dollar notes are displayed in this photo illustration in Johannesburg August 13, 2014. REUTERS/Siphiwe Sibeko