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US stocks fade, Treasury yields jump following jobs report

FILE - This July 15, 2013, file photo, shows the New York Stock Exchange. U.S. stocks faded a bit from their record highs in early trading Friday, Oct. 6, 2017, and the Standard & Poor’s 500 index was on pace to snap its longest winning streak in four years. (AP Photo/Mark Lennihan, File)
October 06, 2017 - 7:25 AM

NEW YORK - U.S. stocks faded a bit from their record highs in early trading Friday, and the Standard & Poor's 500 index was on pace to snap its longest winning streak in four years. Treasury yields climbed after the government's monthly jobs report showed wages rose more than expected last month, which should keep the Federal Reserve on pace to continue raising interest rates.

The jobs report, often the most anticipated economic data of each month, was unusually difficult to parse after damage from recent hurricanes affected hiring from Texas to Florida, economists say.

KEEPING SCORE: The Standard & Poor's 500 index fell nearly 3 points, or 0.1 per cent, to 2,549, as of 10:00 a.m. Eastern time. If it stays there, it would be the first loss for the index in nine days.

The Dow Jones industrial average lost 8, or less than 0.1 per cent, to 22,767, and the Nasdaq composite was close to flat at 6,586. All three indexes closed at records on Thursday.

WASHOUT JOBS REPORT: Employers cut more jobs last month than they added, the first time that's happened in seven years. It's a sharp turnaround from earlier this year, when the strengthening job market was encouraging investors to push stocks higher and higher.

Economists had been warning of a particularly weak figure and cautioned not to take too much away from the report. Hurricanes Harvey and Irma meant the closure of thousands of businesses, and drops in employment at restaurants and bars were a big driver of last month's decline.

Other recent economic data have been more encouraging, including particularly strong reports on the nation's manufacturing and services sectors earlier this week.

Friday's jobs report contained some encouraging signs. Average hourly wages jumped 2.9 per cent from a year earlier, more than economists expected. Some of that may be due to how many lower-wage jobs were lost following the hurricanes, but the government also revised up its figure for wage growth in August.

YIELDS RISE: Stronger wage growth could push up inflation and keep the Federal Reserve on its course to slowly raise interest rates off their record lows.

The yield on the 10-year Treasury rose to 2.39 per cent from 2.35 per cent late Thursday and touched its highest level since May.

The two-year yield climbed to 1.52 per cent from 1.49 per cent, and the 30-year yield rose to 2.94 per cent from 2.89 per cent.

FINANCIALS UP: Banks benefit from higher interest rates because they can mean bigger profits from making loans. Financial stocks in the S&P 500 rose 0.3 per cent.

DIVIDENDS DOWN: Higher interest rates make bonds more attractive to investors looking for income, and that undercuts demand for stocks that pay relatively big dividends.

Telecom stocks in the S&P 500 fell 1.6 per cent, by far the largest drop among the 11 sectors that make up the index. Other traditional dividend payers were also weak. Real estate stocks fell 0.9 per cent, and utilities dropped 0.6 per cent.

WAREHOUSE WEAKNESS: Costco Wholesale fell the most in the S&P 500 despite reporting stronger earnings for the latest quarter than expected. Analysts pointed to a slight drop in its membership renewal rates, among other factors.

Costco lost $9.11, or 5.5 per cent, to $157.98.

COMMODITIES: Higher interest rates tend to mean less demand for gold, and the metal's price dropped $9.30 to $1,263.90 per ounce.

Silver fell 24 cents to $16.40 per ounce, and copper lost 2 cents to $3.03 per pound.

Benchmark U.S. crude sank $1.41, or 2.8 per cent, to $49.38 per barrel. Brent crude, the international standard, lost $1.09 to $55.91 per barrel.

MARKETS OVERSEAS: The FTSE 100 in London rose 0.1 per cent, France's CAC 40 fell 0.3 per cent and Germany's DAX was close to flat.

Japan's Nikkei 225 rose 0.3 per cent, and the Hang Seng in Hong Kong added 0.3 per cent.

CURRENCIES: The dollar rose to 113.38 Japanese yen from 112.85 yen late Thursday. The euro fell to $1.1696 from $1.1708, and the British pound fell to $1.3035 from $1.3116.

News from © The Associated Press, 2017
The Associated Press

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