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.
“On the face of it, these numbers are definitely good and a confirmation that all the weather-related distortions are a thing of the past,” said Ian Gunner, portfolio manager at Altana Hard Currency Fund.
“But I would wait for another month of solid job gains to see if this is really a one-off or a trend.”
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.
The Dow Jones industrial average .DJI fell 10.46 points or 0.06 percent, to 16,548.41, the S&P 500 .SPX gained 0.63 points or 0.03 percent, to 1,884.31 and the Nasdaq Composite .IXIC added 1.014 points or 0.02 percent, to 4,128.465.
In the currency market, the dollar .DXY edged lower against the yen and was flat against the euro, giving up earlier gains.
Global markets were flat. The MSCI All-World Index .MIWD00000PUS rose 0.1 percent while the FTSEurofirst 300 slipped 0.2 percent.
The job gains were felt in Canada as well, where the TSX .GSPTSE, Canada’s main stock index, rose to its highest in almost six years.
Among commodities, oil remained top-heavy after Thursday’s slip following disappointing Chinese economic data and a survey showing U.S. crude stocks rose last week to their highest level since 1982. U.S. crude futures gained 35 cents to $99.78 a barrel while Brent crude rose 66 cents to $108.42.
Gold rose by $10.61 to $1,294.10, while copper, whose industrial uses make it sensitive to growth expectations, gained 0.9 percent.
Additional reporting by Marc Jones in London; Editing by Catherine Evans and Meredith Mazzilli