By Herbert Lash
NEW YORK (Reuters) - A slide in momentum stocks pulled Wall Street and a measure of global equities lower on Friday despite a solid U.S. jobs report, while the dollar weakened on views the Federal Reserve will likely continue to wind down its stimulus.
The U.S. bond market surprisingly rallied, particularly five-year Treasury notes, which had been weak lately on fears the Fed could raise interest rates earlier than anticipated.
The FTSEurofirst 300 index of European shares touched a high last seen in 2008 on the jobs data and closed higher, marking nine straight gains and three consecutive weeks of higher closes.
But stocks on Wall Street retreated after stabilizing earlier in the week as momentum stocks such as biotechs fell for a second straight session. The Nasdaq biotech index lost 3.2 percent and the Nasdaq composite fell more than 2 percent, pulling down U.S. stocks and global equities.
"You've got some big names in there. There is a high correlation inside of those groups," said Keith Bliss, senior vice-president at Cuttone & Co in New York. "Managers tend to trade the entire group as opposed to individual names. So that of course, is hitting the Nasdaq and everybody else."
Equities had opened higher on optimism spurred by the U.S. nonfarm payrolls report, which showed jobs rose by 192,000 in March, just shy of the 200,000 forecast, after rising 197,000 in February. The unemployment rate was unchanged at 6.7 percent.
With a solid pace of hiring for a second month, the economy appears to be recovering from a winter slowdown.
A smaller survey of households, from which the unemployment rate is derived, showed a much bigger surge in employment. That jump was met by a rise in the number of people entering the labor force, a show of confidence in the U.S. job market.
The percentage of working-age Americans with a job reached its highest level since the summer of 2009.
"Overall, people are taking this as a sign there isn't some sort of underlying weakness in the economy," said Kate Warne, investment strategist at Edward Jones in St. Louis.
"It has fit into people's belief that most of the weakness we saw earlier was due to the weather and not something really changing about the economy."
The S&P 500 hit a fresh record high before retreating. MSCI's all-country world stock index fell 0.07 percent.
The Dow Jones industrial average fell 40.17 points, or 0.24 percent, to 16,532.38. The S&P 500 lost 9.96 points, or 0.53 percent, to 1,878.81 and the Nasdaq Composite dropped 83.989 points, or 1.98 percent, to 4,153.75.
Bond prices rose, with the 5-year up 12/32 in price to yield 1.7008 percent. The benchmark 10-year U.S. Treasury note rose 16/32 in price to yield 2.7298 percent.
"This number doesn't give any reason to move up the Fed timing of rate hikes, which is what was feared most," said John Briggs, U.S. rates strategist at RBS in Stamford, Connecticut.
The FTSEurofirst 300 index closed up 0.56 percent at 1,352.78 points.
The dollar was choppy against the euro and declined against other major currencies despite the solid U.S. jobs gains.
The jobs report will likely encourage the Fed to continue reducing, or tapering, its massive monetary stimulus, according to Anthony Valeri, investment strategist at LPL Financial in San Diego.
"It's a Goldilocks report, not too warm and not too cold, and puts pressure on the next report in May to be good," Valeri said. "It doesn't change the pace of tapering and shows the economy is still on track."
The greenback was up 0.17 percent against the euro at $1.3695. It fell 0.51 percent to 103.38 against the Japanese yen after hitting a session high of 104.12 yen in trading immediately after the employment report.
Brent crude rose above $106 a barrel as expectations of a deal to reopen vital Libyan oil ports were balanced by doubts that a lasting resolution was imminent.
Brent crude was up 69 cents at $106.84 a barrel. U.S. crude, or West Texas Intermediate (WTI), rose $1.04 to $101.33 a barrel.
(Additional reporting by Marc Jones in London, reporting by Herbert Lash; Editing by Bernadette Baum and Meredith Mazzilli)