Dollar and Stocks Fall, Bonds Advance With Gold After Jobs Data

Employers Added Fewest Jobs in Nearly 6 Years
  • S&P 500 Index erases weekly decline, closes below 2,100 level
  • Bloomberg Commodity Index on cusp of entering a bull market

U.S. stocks fell with the dollar, while Treasuries and gold gained after American employers added the fewest jobs in almost six years in May, bolstering the case for the Federal Reserve to leave interests rates lower for longer.

The S&P 500 Index ended the week little changed, while the likelihood for a delayed rate increase sent financial shares lower. The dollar tumbled the most in six months versus the euro, while investors sought the safest government securities, sending the yield on two-year Treasuries to the steepest drop since September and the yield on German 10-year bunds to a record low. The weak greenback sparked a rally in emerging-market assets and commodities.

“Things are never as bad or as good as they seem,” said Michael Arone, the Boston-based chief investment strategist at State Street Global Advisors’ U.S. intermediary business. The firm oversees $2 trillion. “Fed futures are pricing in a decreasing probability for June and stocks probably don’t mind that scenario all that much. We’re moving away from this risk-on, risk-off formula to one that’s more Fed on, Fed off.”

For more on how the U.S. labor market affects the economy, click here.

The addition of 38,000 jobs last month was less than the most pessimistic of forecasts in a Bloomberg survey, throwing cold water on equity gains that took the S&P 500 within 1.2 percent of its all-time high. Smaller employment gains reduce the odds of a more pronounced upturn economic growth at a time when corporate profits are on a downswing and global markets remain weak. The odds for a Federal Reserve rate increase fell to 27 percent in July, down from 55 percent a day earlier.

Stocks

The S&P 500 fell 0.3 percent to 2,099.13 at 4 p.m. in New York, after dropping as much as 1 percent. The index slid back below 2,100 after closing higher than that for the first time since April. The level has capped two prior rallies in the past eight months.

Utilities and phone stocks rose on Friday as the prospect for lower rates sent investors searching for shares that have large payout ratios. Raw-material shares also climbed, with Newmont Mining Corp. jumping 9.4 percent for the biggest gain in the S&P 500.

Financial shares trimmed losses to 1.4 percent, after falling as much as 2.4 percent. JPMorgan Chase & Co. and Goldman Sachs Group Inc. sank at least 1.8 percent. Insurers MetLife Inc. and Prudential Financial Inc. fell more than 3.1 percent.

Canadian stocks surged back into a bull market. The S&P/TSX Composite Index rose 0.6 percent on Friday, capping a 20 percent rally from a low on Jan. 20.

The Stoxx Europe 600 Index slipped 0.9 percent, extending its first weekly decline in four to 2.4 percent. The MSCI Emerging Markets Index advanced 1.5 percent to a one-month high.

Currencies

The Bloomberg Dollar Spot Index, which tracks the currency against 10 major peers, fell 1.5 percent, the steepest decline since Feb. 3. The dollar dropped 1.9 percent to $1.1363 per euro and lost 2.1 percent to 106.58 yen. The Canadian dollar surged.

The MSCI Emerging Markets Currency Index jumped 1.1 percent, the biggest jump since March.

The rand jumped 3.4 percent, reversing earlier losses and extending an advance to four days. South Africa’s credit rating was kept unchanged by S&P Global Ratings, giving the nation a reprieve from a junk assessment, even as it warned it could lower the ratings if the economy doesn’t recover.

Bonds

The two-year Treasury note yield fell to 0.77 percent, while 10-year yields dropped 10 basis points to 1.7 percent. The gap between yields on five- and 30-year debt, a measure of the yield curve, steepened by the most since March.

“This was quite shocking -- it’s way under expectations,” said Christopher Sullivan, who oversees $2.3 billion as chief investment officer at United Nations Federal Credit Union in New York. The Fed “will postpone a nearby rate hike for sure -- maybe they’ll be forced to look beyond the summer.”

The yield on Germany’s 10-year bund fell five basis points, or 0.05 percentage point, to 0.068 percent, the lowest ever.

Commodities

The Bloomberg Commodity Index rose 0.5 percent to a seven-month high. The gauge bottomed this year in January and is less than half a percentage point from a level that would mark a 20 percent advance, meeting the common definition of a bull market.

Gold in the spot market climbed 2.8 percent to $1,244.29 an ounce. Bullion is coming off of its biggest monthly loss since November after signs of an improving U.S. economy spurred speculation that the Fed could tighten monetary policy as soon as this month.

Crude futures fell on both sides of the Atlantic after closing above $50 a barrel in London for the first time in seven months. West Texas Intermediate oil slid to $48.62 a barrel. Brent crude slid 0.8 percent to trade at $49.64 a barrel after closing yesterday at $50.04.

Zinc rose for a seventh day for its longest rising streak in almost two years amid continued speculation of a raw materials shortage, rising with copper and aluminum.

Sugar rose to the highest in almost two years as heavy rainfall disrupted loadings at ports in Brazil, slowing down the harvest at a time of peak demand.

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