NEW YORK, Feb 3 (Reuters) – A gauge of global stocks fell more than 1% as U.S. Treasury yields and the dollar rose on Friday after a U.S. jobs report from a shocking force has reignited concerns that the Federal Reserve could remain aggressive in its interest rate hike lane as it attempts to rein in inflation.
The Labor Department report showed non-farm payrolls jumped by 517,000 jobs in January, well above the 185,000 estimate of economists polled by Reuters, with December data also revised upwards . The average hourly wage rose 0.3%, as expected, from 0.4% the previous month, while the unemployment rate of 3.4% was the lowest since 1969.
Stocks rallied to start the year on expectations that the Fed could be forced to pause or even pivot from its rate hikes in the second half of the year, growing more confident after comments from Fed Chairman Powell on Wednesday who acknowledged that the “disinflationary” process may have begun. Additional fuel was added after policy announcements from the European Central Bank (ECB) and Bank of England (BoE) on Thursday.
“While it’s very helpful to see jobs increase, it’s really a horse race between that continued income and how quickly inflation comes down,” said Lisa Erickson, head of the government markets group at US. Bank Wealth Management in Minneapolis, Minnesota.
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“The Fed is really in a tough spot trying to navigate between maintaining these price pressures and not causing too much economic trouble.”
Interest rate futures now indicate that the Fed is likely to make at least two more rate hikes, taking the benchmark rate above 5%.
U.S. stocks closed lower, with additional downward pressure provided by a 2.75% decline in Google parent Alphabet (GOOGL.O) and an 8.43% decline in Amazon (AMZN. O) after their quarterly results.
Apple (AAPL.O), however, helped stave off further declines as the stock erased losses in premarket trading to close 2.44% higher after its quarterly earnings.
Earnings are now expected to fall 2.7% for the quarter from the period a year ago, according to Refinitiv data, down from the 1.6% decline expected at the start of the year.
Other data showed the U.S. services industry rebounded strongly in January, according to the Institute for Supply Management (ISM).
The Dow Jones Industrial Average (.DJI) fell 127.93 points, or 0.38%, to 33,926.01; the S&P 500 (.SPX) lost 43.28 points, or 1.04%, to 4,136.48; and the Nasdaq Composite (.IXIC) fell 193.86 points, or 1.59%, to 12,006.96.
Even with Friday’s declines, the S&P 500 and Nasdaq posted weekly gains, with the Nasdaq posting a fifth consecutive week of gains, its longest since October-November 2021.
European stocks closed slightly higher, erasing earlier declines on optimism about the region’s economy. The pan-European STOXX 600 index (.STOXX) rose 0.34%, but the MSCI gauge of stocks across the world (.MIWD00000PUS) lost 1.08%. The STOXX index closed with a 1.23% gain for the week, its highest closing level since April 21. The MSCI index was on track for a second consecutive weekly advance, even with Friday’s drop.
US Treasury yields climbed after the payrolls report, with those on the benchmark 10-year note rising 13 basis points to 3.528% from 3.398% on Thursday evening, poised for their biggest jump in a day. since October 19.
The greenback strengthened in the wake of the data, climbing nine months on Thursday to hit 103.01, its highest since Jan. 12, as the dollar index rose 1.149% and the euro fell. fell 1.02% to $1.0799.
The Japanese yen weakened 1.90% to 131.18 to the dollar, while the pound last traded at $1.2053, down 1.39% on the day.
Crude prices fell in part on the strength of the dollar and concerns over rising interest rates, with Brent and WTI both falling nearly 8% on the week.
U.S. crude stood 3.28% at $73.39 a barrel and Brent at $79.94, down 2.71% on the day.
Reporting by Chuck Mikolajczak; additional reporting by Herbert Lash; Editing by Kirsten Donovan and Jonathan Oatis
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