Stocks close slightly lower
A burst of hiring last month led to a drop in the bond market Friday as traders placed bets that the Federal Reserve would raise interest rates this year. Despite the good economic news, the stock market drifted to another loss, finishing lower for the second week in a row.
The Labor Department reported that U.S. employers added 280,000 workers to their payrolls in May and also tweaked its estimate of hiring in March and April, raising hiring numbers for the two months by a combined 32,000.
Traders reacted immediately to the report, dropping U.S. government bonds and shooting yields up. The benchmark 10-year Treasury note bounced to a high for the year, 2.43%, before drifting back to 2.40%. The dollar gained strength against the Japanese yen and other major currencies.
“I was pleasantly surprised,” said Russell Price, Ameriprise Financial’s senior economist. “This adds to the recent spate of positive data that shows the economy is really pulling out of its winter slump.”
But major stock indexes finished mixed. The Dow Jones industrial average fell 56.12 points, or 0.3%, to 17,849.46.
The Standard & Poor’s 500 index lost 3.01 points, or 0.1%, to 2,092.83, while the Nasdaq edged up 9.33 points, or 0.2%, to 5,068.46.
Big banks and other companies that benefit from rising interest rates gained: JPMorgan Chase, Wells Fargo and PNC Financial Services hit all-time highs.
Jeremy Zirin, head of in- vestment strategy at UBS Wealth Management, said the rapid rise in interest rates in recent months has unsettled some investors. In April, when traders were more concerned about the strength of the global economy, the yield on the 10-year Treasury fell below 1.90%.
In general, a rise in inter- est rates ref lects economic growth, but a quick leap could slow the economy down by triggering a sudden drop in lending.
Zirin said investors “want to see the rise in bond yields be more tempered. They can handle higher interest rates as long as they come at a measured pace.”