Wall Street slips despite U.S. jobs data; bond prices rise

By David Gaffen
May 2, 2014
A phone hangs above the floor of the New York Stock Exchange
A phone hangs above the floor of the New York Stock Exchange shortly after the opening of the market August 19, 2011. REUTERS/Lucas Jackson

By David Gaffen

NEW YORK (Reuters) - Wall Street shares slipped and investors retreated to long-dated government debt on Friday, as enthusiasm over strong U.S. jobs growth was undercut by flat wages and a decline in the number of people looking for work.

Traders also said that news on more violence in eastern Ukraine sparked a shift into the bond market that pushed the yield on the 30-year note to lows not seen since last June.

The U.S. economy added 288,000 jobs in April, more than expected. Even so, the report raised some concerns as more than 800,000 people left the U.S. labor force and average hourly wages were unchanged in April.

"The market perceives the unemployment numbers as good on quantity but bad on quality," said Guy Lebas, chief fixed-income strategist at Janney Montgomery Scott in Philadelphia.

Selling in U.S. Treasuries was modest in short- and medium-dated notes as investors responded to an increased likelihood of interest-rate hikes from the Federal Reserve. Investors moved into longer-dated Treasuries, pushing down their yields, on views that the economy is still not strong enough to spark inflation.

The three-year Treasury note was down 2/32 in price to yield 0.872 percent, while the 30-year bond, after an earlier selloff, rose 1-6/32 in price, lowering its yield to 3.353 percent.

The jobs figures bumped up the odds of the Federal Reserve raising rates sooner in 2015, with expectations for a rate increase by June 2015 increasing to about 56 percent from 47 percent a day earlier.

U.S. stocks slipped after an early rally. The S&P 500 began the day not far from its all-time closing high of 1,890.90 set on April 2 but traded mostly flat on Friday after the labor market report.

"On the face of it, these numbers are definitely good and a confirmation that all the weather-related distortions are a thing of the past," said Ian Gunner, portfolio manager at Altana Hard Currency Fund. "But I would wait for another month of solid job gains to see if this is really a one-off or a trend."

Pro-Russian rebels shot down two Ukrainian helicopters on Friday, killing two crew members, while Moscow accused Kiev of wrecking hopes of peace by launching a "criminal" assault to retake the separatist-held town of Slaviansk.

The Dow Jones industrial average fell 56.6 points or 0.34 percent, to 16,502.27, the S&P 500 lost 3.71 points, or 0.2 percent, to 1,879.97, and the Nasdaq Composite dropped 4.737 points, or 0.11 percent, to 4,122.714.

In the currency market, the dollar edged lower against the yen and was flat against the euro, giving up earlier gains.

Global markets were flat. The MSCI All-World Index lost 0.01 percent while the FTSEurofirst 300 fell 0.3 percent.

Among commodities, oil remained top-heavy after Thursday's slip following disappointing Chinese economic data and a survey showing U.S. crude stocks rose last week to their highest level since 1982. U.S. crude futures gained 43 cents to $99.85 a barrel while Brent crude rose 95 cents to $108.71.

Gold rose by $10.61 to $1,294.10, while copper, whose industrial uses make it sensitive to growth expectations, gained 1.2 percent.

(Additional reporting by Marc Jones in London; Editing by Meredith Mazzilli and Leslie Adler)