By Saumya Vaishampayan
U.S. stock futures rose while bonds fell on a
better-than-expected jobs report in the U.S., as investors embraced
the latest sign of a strengthening economy.
The dollar soared against the euro and the yen, underscoring
traders' expectations that the Federal Reserve will raise
short-term interest rates next year at a time when other major
central banks could potentially expand easy-money policies.
Stock futures initially erased gains and then moved higher after
the Labor Department reported that nonfarm payrolls rose a
seasonally adjusted 321,000 last month, the strongest month of
hiring since January 2012, the Labor Department said Friday.
Economists surveyed by The Wall Street Journal expected the
creation of 230,000 jobs in November.
Dow Jones Industrial Average futures rose 45 points, or 0.3%, to
17933. S&P 500 futures rose three points, or 0.1%, to 2074, and
Nasdaq-100 futures gained 10 points, or 0.2%, to 4324. Changes in
stock futures don't always accurately predict moves in the stock
market after the opening bell.
While November payrolls were above forecasts, John Canally,
chief economic strategist at LPL Financial, said one report
wouldn't prompt the Federal Reserve to change its view on when
interest rates should rise.
"Whatever your view of the jobs market was at 8:29, it's pretty
much the same now," he said. "I wouldn't put too much into any one
month's number, " he added.
Bets that the Fed will raise rates at its Sept. 2015 policy
meeting rose only slightly to 58% after the strong November jobs
report, from 56.9% Thursday, based on pricing for federal funds
rate futures from the CME Group. Odds for a June move ticked up to
23% from 22.3%.
Still, elsewhere in the bond market prices fell as the
affirmation of steady economic growth in the U.S. sapped investors'
appetite for U.S. Treasurys.
Shorter-dated Treasurys led the selloff. Debt with shorter
maturities is more vulnerable to shifts in expectations about
interest rates. The yield on the two-year note rose to 0.639%, the
highest intraday level since 2011.
"If we have two or three more strong jobs reports like this, it
increases the chance that the Fed would raise interest rates sooner
than many have thought," said Gary Pollack, who helps oversee $12
billion as head of fixed-income trading in New York at Deutsche
Bank AG's private wealth management unit.
The benchmark 10-year note was yielding 2.322%, according to
Tradeweb. Before the report was released, the note was yielding
2.26%. When bond yields rise, prices fall.
"The U.S. recovery is now well on track...and the wage growth
should dispel any deflationary or low inflationary fears, and the
bond market is selling off in response," said Eric Stein,
co-director of global income at money manager Eaton Vance
Management which has $297.7 billion in assets.
U.S. stocks inched lower Thursday, snapping a two-day winning
streak. The Dow lost 0.1% to 17900.10 and the S&P 500 declined
0.1% to 2071.92.
Many investors say the backdrop for stocks remains positive.
Stocks have hit a series of records in recent weeks as data have
confirmed the U.S. economy and corporate earnings are both growing.
In fact, the U.S. is on track to post its strongest year of job
growth since 1999. Easing efforts by major central banks will
maintain pressure on already-low global interest rates, making
stocks appear more attractive than other assets.
Friday's positive tone for stocks was sparked by gains in
Europe, where stocks and bonds climbed. The Stoxx Europe 600 rose
1.5%.
In corporate news, Dollar Tree Inc. said its pending $8.5
billion acquisition of Family Dollar Stores Inc. could close as
early as February. Dollar Tree said it would have to shed a small
number of stores for antitrust approval of the deal. Shares of both
companies were inactive in premarket trade.
Amazon.com Inc. is getting into the diaper business in a move
that pits itself against Procter & Gamble Co. Amazon will sell
diapers and wipes through a brand called Elements and the company
plans to eventually expand into other household products. Amazon
shares inched down 0.1%, while those of Procter & Gamble fell
1.3% premarket.
Min Zeng and Alexandra Scaggs contributed to this article.
Write to Saumya Vaishampayan at saumya.vaishampayan@wsj.com
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