GLOBAL MARKETS-Stocks fall, U.S. bond yields jump on strong jobs report

BY Reuters | ECONOMIC | 02/03/23 10:57 AM EST


Jan U.S. payrolls 517k vs 185k estimate


Dollar bounces off 9-month lows


Amazon (AMZN), Alphabet lower after earnings

(Updates to open of U.S. markets, changes byline, dateline; previous LONDON)

By Chuck Mikolajczak

NEW YORK, Feb 3 (Reuters) - A gauge of global stocks slumped while U.S. Treasury yields and the dollar shot higher on Friday after a surprisingly strong U.S. jobs report rekindled concerns the Federal Reserve may need to stay aggressive in its rate hike path in order to tame inflation.

The report from the Labor Department showed nonfarm payrolls surged by 517,000 jobs in January, well above the 185,000 estimate of economists polled by Reuters, with data for December also being revised higher.

Equities have rallied to start the year on expectations the Fed may be forced to pause or even pivot from its rate hikes in the back half of the year, growing more confident after comments from Fed Chair Powell on Wednesday that acknowledged the "disinflationary" process may have begun. Additional fuel was added after policy announcements by the European Central Bank (ECB) and Bank of England (BoE) on Thursday.

"Anyone who is calling for any sort of a recession now, I don't know how you can get a recession when you are getting half a million people hired in one report, and you get upward revisions for the past two months and the breadth on the support was pretty incredible, it was almost across the board in a lot of these areas where you saw these increases," said Shawn Cruz, Head Trading Strategist at TD Ameritrade in Chicago.

"So this is kind of a blockbuster report, it is certainly going to put the Fed in a difficult spot."

Interest rate futures now indicate the Fed is likely to deliver at least two more interest-rate hikes, taking the benchmark rate to above 5%.

U.S. stocks opened lower after the report, with additional downward pressure being supplied by a 1.01% decline in Google parent Alphabet and a 5.46% drop in Amazon (AMZN) after their quarterly results.

Apple (AAPL), however, helped curb declines, erasing losses in premarket trading to trade 3.52% higher following its quarterly earnings.

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 fell 13.97 points, or 0.04%, to 34,039.97, the S&P 500 lost 15.18 points, or 0.36%, to 4,164.58 and the Nasdaq Composite dropped 51.84 points, or 0.42%, to 12,148.98.

European stocks edged higher, erasing earlier declines. The pan-European STOXX 600 index rose 0.07% but MSCI's gauge of stocks across the globe shed 0.57%.

U.S. Treasury yields climbed after the payrolls report with those on the benchmark 10-year note up 14.9 basis points to 3.547%, from 3.398% late on Thursday, poised for their biggest one-day jump since Oct. 5.

The greenback strengthened in the wake of the data, climbing off a 9-month low hit on Thursday, with the dollar index 0.737% higher and the euro down 0.55% to $1.085.

The Japanese yen weakened 1.72% to 130.90 per dollar, while Sterling was last trading at $1.2105, down 0.97% on the day.

Crude prices advanced but were still poised for a weekly decline.

U.S. crude was up 2.62% at $77.87 per barrel and Brent was at $84.05, up 2.29% on the day.

(Reporting by Chuck Mikolajczak; Editing by Kirsten Donovan)

In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.