Stocks rise, Treasury yields soar after jobs data

Stocks notched modest gains and Treasury yields soared Friday on Wall Street after a healthy report on the U.S. job market strengthened expectations for coming interest rate hikes.

The S&P 500 rose 0.3% after bouncing between small gains and losses. The benchmark index eked out a slight gain for the week, it’s third straight amid lingering concerns about high inflation, higher interest rates from the Federal Reserve and the economic effects of the war in Ukraine.

The Dow Jones Industrial Average rose 0.4 percent and the Nasdaq composite rose 0.3 percent. Small company stocks outgained the broader market, driving the Russell 2000 1 percent higher.

The sharpest action was again in the bond market, where the yield on the two-year Treasury approached its highest level in more than three years.

Yields jumped after a U.S. government report showed employers added 431,000 jobs last month. That was slightly below economists’ expectations for 477,500, but the report also revised earlier months’ data to reflect more strength. It showed raises for workers accelerated last month but at a slower pace than overall inflation, while the unemployment rate improved to 3.6 percent from 3.7 percent.

A strong jobs market and economy give the Federal Reserve more leeway to raise interest rates sharply in order to beat down the high inflation that’s sweeping the country.

Such expectations drive shorterterm Treasury yields in particular, and the two-year yield leaped to 2.45 percent from 2.28 percent late Thursday.

The two-year yield again rose above the 10-year yield, which was also climbing, but not as quickly. The 10-year yield rose to 2.38 percent from 2.33 percent. On Tuesday, the two-year yield briefly topped the 10-year yield for the first time since 2019, a potentially ominous sign.

All told, the S&P 500 rose 15.45 points to 4,545.86. The Dow added 139.92 points to 34,818.27, while the Nasdaq rose 40.98 points to 14,261.50. The Russell 2000 gained 20.99 points to 2,091.11.