SOURCE: REUTERS
NEW YORK — The US dollar rose and Treasury yields broke above key levels on Friday as investors remained confident in the US economic recovery despite conflicting messages from a key jobs report for January.
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NEW YORK — The US dollar rose and Treasury yields broke above key levels on Friday as investors remained confident in the US economic recovery despite conflicting messages from a key jobs report for January.
Global stocks posted limited gains as major indexes hit resistance after a prolonged rally. Still, the S&P 500 closed at a 2-1/2-year high and had its best week in nine.
US crude oil prices fell nearly $2 in volatile trade on talk that Egyptian President Hosni Mubarak was about to step down. The speculation was based on a television report that later appeared to be unfounded, but oil prices, which had been rising this week on the unrest in Egypt, remained lower.
The euro fell about 0.3 percent while long Treasury bonds lost more than one point in price as the US nonfarm payrolls data did not fundamentally change investors' view that the world's largest economy is recovering but more monetary stimulus is needed.
The Labor Department reported US employers added only 36,000 jobs in January as severe snow storms slammed large parts of the country, but the unemployment rate fell to 9.0 percent, the lowest level since April 2009.
The job gains were only one quarter of the 145,000 economists had expected, but the jobless rate was better than the forecast that it would tick up to 9.5 percent.
"The employment report is stronger than the headline as weather probably damped it," said Bret Barker, portfolio manager with the TCW Group. "This is true especially when you contrast it to the other employment data points we are seeing in the PMIs and jobless claims."
Tom Bentz, a broker with BNP Paribas Commodity Futures in New York, said markets were being kept on edge by events in Egypt. "Markets are still concerned about Egypt unrest continuing. Traders may still be concerned about being short ahead of the weekend." he said.
The euro fell as low as $1.3546 on trading platform EBS, below a key support level of $1.3570. It last traded at 1.3584, 0.34 percent lower.
The dollar also gained against other major currencies, with the US Dollar Index up 0.38 percent. Against the Japanese yen, the greenback strengthened 0.77 percent to 82.22.
"The drop in the jobless rate is a surprise and the dollar is rallying on this," said Brian Dolan, chief strategist at Forex.com in Bedminster, New Jersey. "Yields are moving up and while job creation not where people want it to be, the feeling is there is an underlying momentum there."
Traders said the fall in the euro through the key support level of $1.3570 suggested that a three-week rally in the single currency may be showing signs of exhaustion.
"We haven't seen a three-day slide since the euro's January rally began, and it was looking overbought this week, so we seem to be in correction mode," said BNP Paribas technical strategist Andrew Chaveriat. He said the euro could test $1.35 in coming days and $1.3250-$1.3350 over the next few weeks.
Investors also dumped US Treasury bonds after the jobs report, sending yields on long bonds to a near 10-month high.
Prices of 30-year bonds fell 34/32, sending yields to 4.7359 percent, their highest since last April 15. The 10-year US Treasury note was down 25/32 in price, with the yield at 3.6457 percent.
The jump in Treasury yields increased fears that US mortgage rates could rise toward 5 percent and further weigh on the struggling US housing market.
World stocks rally cools down
World stocks posted small gains as investors preferred not to take on large positions in face of continuous unrest in Egypt.
MSCI's All-Country World Index edged 0.13 percent higher, while its benchmark emerging market index dipped 0.2 percent.
The major Wall Street indexes rose moderately as investors rotated into defensive and lagging sectors, while taking some profits in energy, materials, and industrials.
"The market has been getting more selective and the rotation is important," said Wayne Kaufman, chief market analyst at John Thomas Financial in New York.
The Dow Jones industrial average closed up 29.89 points, or 0.25 percent, at 12,092.15, while the Standard & Poor's 500 Index finished up 3.77 points, or 0.29 percent, at 1,310.87. The Nasdaq Composite Index rose 15.42 points, or 0.56 percent, at 2,769.30.
For the week, the Dow rose 2.3 percent, the S&P 500 gained 2.7 percent, and the Nasdaq climbed 3.1 percent.
In Europe, the FTSEurofirst 300 index of leading shares closed 0.23 percent higher, supported by construction stocks.
US crude oil prices fell $1.51 to $89.03 a barrel as the speculation on Mubarak's resignation sparked profit-taking, from which the market failed to recover even after the speculation proved unfounded.
"The expectation that some resolution was coming flushed a lot of length out of the market," said Gene McGillian, analyst at Tradition Energy in Stamford, Connecticut.
Oil prices were also pressured by the strength of the dollar, which makes the commodity more expensive for non-US investors.
Optimism about the global economic recovery drove copper prices above $10,000 a tonne. Contracts for delivery in three months on the London Metal Exchange closed at $10,050 a tonne, after reaching a record-high $10,100.
US crude oil prices fell nearly $2 in volatile trade on talk that Egyptian President Hosni Mubarak was about to step down. The speculation was based on a television report that later appeared to be unfounded, but oil prices, which had been rising this week on the unrest in Egypt, remained lower.
The euro fell about 0.3 percent while long Treasury bonds lost more than one point in price as the US nonfarm payrolls data did not fundamentally change investors' view that the world's largest economy is recovering but more monetary stimulus is needed.
The Labor Department reported US employers added only 36,000 jobs in January as severe snow storms slammed large parts of the country, but the unemployment rate fell to 9.0 percent, the lowest level since April 2009.
The job gains were only one quarter of the 145,000 economists had expected, but the jobless rate was better than the forecast that it would tick up to 9.5 percent.
"The employment report is stronger than the headline as weather probably damped it," said Bret Barker, portfolio manager with the TCW Group. "This is true especially when you contrast it to the other employment data points we are seeing in the PMIs and jobless claims."
Tom Bentz, a broker with BNP Paribas Commodity Futures in New York, said markets were being kept on edge by events in Egypt. "Markets are still concerned about Egypt unrest continuing. Traders may still be concerned about being short ahead of the weekend." he said.
The euro fell as low as $1.3546 on trading platform EBS, below a key support level of $1.3570. It last traded at 1.3584, 0.34 percent lower.
The dollar also gained against other major currencies, with the US Dollar Index up 0.38 percent. Against the Japanese yen, the greenback strengthened 0.77 percent to 82.22.
"The drop in the jobless rate is a surprise and the dollar is rallying on this," said Brian Dolan, chief strategist at Forex.com in Bedminster, New Jersey. "Yields are moving up and while job creation not where people want it to be, the feeling is there is an underlying momentum there."
Traders said the fall in the euro through the key support level of $1.3570 suggested that a three-week rally in the single currency may be showing signs of exhaustion.
"We haven't seen a three-day slide since the euro's January rally began, and it was looking overbought this week, so we seem to be in correction mode," said BNP Paribas technical strategist Andrew Chaveriat. He said the euro could test $1.35 in coming days and $1.3250-$1.3350 over the next few weeks.
Investors also dumped US Treasury bonds after the jobs report, sending yields on long bonds to a near 10-month high.
Prices of 30-year bonds fell 34/32, sending yields to 4.7359 percent, their highest since last April 15. The 10-year US Treasury note was down 25/32 in price, with the yield at 3.6457 percent.
The jump in Treasury yields increased fears that US mortgage rates could rise toward 5 percent and further weigh on the struggling US housing market.
World stocks rally cools down
World stocks posted small gains as investors preferred not to take on large positions in face of continuous unrest in Egypt.
MSCI's All-Country World Index edged 0.13 percent higher, while its benchmark emerging market index dipped 0.2 percent.
The major Wall Street indexes rose moderately as investors rotated into defensive and lagging sectors, while taking some profits in energy, materials, and industrials.
"The market has been getting more selective and the rotation is important," said Wayne Kaufman, chief market analyst at John Thomas Financial in New York.
The Dow Jones industrial average closed up 29.89 points, or 0.25 percent, at 12,092.15, while the Standard & Poor's 500 Index finished up 3.77 points, or 0.29 percent, at 1,310.87. The Nasdaq Composite Index rose 15.42 points, or 0.56 percent, at 2,769.30.
For the week, the Dow rose 2.3 percent, the S&P 500 gained 2.7 percent, and the Nasdaq climbed 3.1 percent.
In Europe, the FTSEurofirst 300 index of leading shares closed 0.23 percent higher, supported by construction stocks.
US crude oil prices fell $1.51 to $89.03 a barrel as the speculation on Mubarak's resignation sparked profit-taking, from which the market failed to recover even after the speculation proved unfounded.
"The expectation that some resolution was coming flushed a lot of length out of the market," said Gene McGillian, analyst at Tradition Energy in Stamford, Connecticut.
Oil prices were also pressured by the strength of the dollar, which makes the commodity more expensive for non-US investors.
Optimism about the global economic recovery drove copper prices above $10,000 a tonne. Contracts for delivery in three months on the London Metal Exchange closed at $10,050 a tonne, after reaching a record-high $10,100.
