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S&P 500 dips, Treasury yields rise and dollar rallies following robust US jobs report

NEW YORK : The S&P 500 headed lower, Treasury yields advanced and the dollar rose on Friday after the U.S. July employment report blasted past expectations, raising the odds of continued monetary tightening from the Federal Reserve.

Wall Street pared losses as the session progressed. At close, the Nasdaq joined the bellwether index in the red and the blue-chip Dow reversed course to end in positive territory.

Benchmark U.S. Treasury yields and oil prices headed higher as the stronger-than-expected payrolls data appeared to confirm the economy is not yet in recession, which increased the likelihood of more aggressive rate increases from the Fed in September.

The employment report "telegraphed some work needs to be done on the Fed’s side, regarding their interest rate policy," said Matthew Keator, managing partner in the Keator Group, a wealth management firm in Lenox, Massachusetts. "That was certainly the market’s initial reaction."

The Labor Department's employment report showed the U.S. economy added 528,000 jobs in July, more than double the 250,000 expected, while wage inflation remained hot and the participation rate edged lower.

"The payrolls number are wonderful from a demand standpoint, more people being paid is great for the economy," said Tim Ghriskey, senior portfolio strategist Ingalls & Snyder in New York.

Evidence of economic strength helped ease risk aversion as the week drew to a close.

"The employment data raises the prospect of a soft landing," Keator said, adding that Fed Chair Jerome Powell has "pointed to the fact that a strong labor market has not historically accompanied recessions."

The Dow Jones Industrial Average rose 76.65 points, or 0.23 per cent, to 32,803.47, the S&P 500 lost 6.75 points, or 0.16 per cent, to 4,145.19 and the Nasdaq Composite dropped 63.03 points, or 0.5 per cent, to 12,657.56.

European shares fell after the U.S. jobs data stoked expectations of continued hawkish Fed policy.

The pan-European STOXX 600 index lost 0.76 per cent and MSCI's gauge of stocks across the globe shed 0.20 per cent.

Emerging market stocks rose 0.75 per cent. MSCI's broadest index of Asia-Pacific shares outside Japan closed 0.61 per cent higher.

U.S. Treasury yields rose and a closely watched part of the yield curve touched its deepest inversion since August 2000 on increased odds of another 75 basis point interest rate hike from the central bank in September.

Benchmark 10-year notes last fell 42/32 in price to yield 2.8287 per cent, from 2.676 per cent late on Thursday.

The 30-year bond last fell 65/32 in price to yield 3.0662 per cent, from 2.961 per cent late on Thursday.

The dollar rallied against a basket of currencies in the wake of the employment report.

The dollar index rose 0.84 per cent, with the euro down 0.63 per cent to $1.0178.

The Japanese yen weakened 1.57 per cent versus the greenback at 135.02 per dollar, while sterling was last trading at $1.2067, down 0.74 per cent on the day.

While crude prices advanced on the prospect of strong demand, they wrapped up the week near multi-month lows due to lingering recession fears.

U.S. crude rose 0.53 per cent to settle at $89.01 per barrel, while Brent settled at $94.92 per barrel, up 0.85 per cent on the day.

Gold dipped as waning recession fears tarnished the safe-haven metal's luster.

Spot gold dropped 1.0 per cent to $1,772.82 an ounce.

Source: Reuters

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