Photographer: David Ryder/Bloomberg

Treasuries Plunge as Dollar Rallies While Stocks Slump

Treasuries plunged and the dollar rallied as better-than-forecast jobs growth bolstered the case for the Federal Reserve to raise interest rates. U.S. stocks fell after approaching all-time highs and oil capped the biggest two-week rally in 17 years.

The yield on two-year U.S. notes jumped 13 basis points at 4 p.m. in New York, the most since 2010. The Bloomberg Dollar Spot index rose 1 percent, the biggest gain this year. The Standard & Poor’s 500 Index fell 0.3 percent, erasing gains after climbing to within 1 percent of a record set in December. Oil climbed 2.4 percent in New York, extending this week’s rally to 7.2 percent. Gold futures dropped to a three-week low.

Payrolls capped the biggest three-month gain in 17 years, and workers earnings increased, Labor Department data showed. Stocks erased gains after S&P lowered its rating on Greece to to B- from B. More than $1.3 trillion has been added to the value of global equities this week as higher oil prices boosted producers and companies including Pfizer Inc. and Staples Inc. announced more than $20 billion in deals.

“The market is still near all-time highs and there are big unanswered questions out there, whether it be Greece, Ukraine, oil prices or when rates will rise,” Matt Maley, an equity strategist at Miller Tabak & Co LLC in Newton, Massachusetts, said by phone. “Maybe that’s why people are not as enthusiastic to pile in here.”

Stocks retreated after the S&P 500 earlier pushed its gain since Jan. 30 to 3.9 percent during intraday trading, good at the time for the biggest weekly advance since October. More than 400 of the gauge’s companies rose in the past four days as the index erased a 2015 decline that exceeded 3.2 percent on Jan. 15 and Jan. 30, data compiled by Bloomberg show.

Jobs Report

Payrolls advanced by 257,000 last month, following a 329,000 gain in December that was bigger than previously reported. The median forecast in a Bloomberg survey of economists called for a 228,000 increase. The unemployment rate climbed to 5.7 percent as the improving job market lured more Americans into the labor force.

“This is a very positive number,” said Lisa Hornby, a fixed income portfolio manager at Schroders in New York. The firm manages about 276 billion pounds ($447 billion) globally. “The market is starting to price the Fed back into 2015. We’d seen the market price out the Fed all year, now it looks like we’ll have a Fed hike at least priced into the tail end of the year now.”

Higher Rates

Treasuries tumbled on renewed speculation the Fed may begin raising interest rates in the first half of this year.

Futures contracts show a 27 percent chance the central bank will lift rates at its policy meeting in June, according to data compiled by Bloomberg. The likelihood Thursday was 18 percent. Investors had pushed back expectations for the first Fed increase since 2006 for much of the month as a collapse in oil prices and sluggish growth in Europe pushed down the outlook for inflation.

Fed Bank of Philadelphia President Charles Plosser said stronger U.S. economic data had him “at the cusp” of thinking the time to raise interest rates was now.

“We’re fast approaching” a point where it’s hard to justify not raising rates, Plosser told CNBC in an interview on Friday.

Financial shares in the S&P 500 gained 0.7 percent amid the prospect of higher rates. Bank of America Corp. and Prudential Financial Inc. added more than 3.3 percent to pace gains. Utility companies, which have the second-highest dividend yield among 10 groups in the S&P 500, plunged 4.1 percent for the biggest loss since August 2011.

Twitter, Pandora

Twitter Inc. rallied 16 percent after posting quarterly revenue that beat projections. LinkedIn Corp. jumped 11 percent after predicting better-than-estimated 2015 profit. Pandora Media Inc. sank 17 percent after fourth-quarter results fell short of analysts’ estimates.

About 78 percent of the gauge’s companies that have posted earnings this season have beaten analyst estimates, while 56 percent have topped sales projections, data compiled by Bloomberg show.

West Texas Intermediate crude rose to $51.69 a barrel after climbing 4.2 percent on Thursday, following an 8.7 percent drop the day before. The Chicago Board Options Exchange Crude Oil Volatility Index, which measures price fluctuations using options of the U.S. Oil Fund, fell 4.6 percent after closing at the highest since April 2009 on Thursday.

Brent Climbs

Brent crude rose 2.2 percent to $57.80 for a 9.1 percent weekly gain. The Bloomberg Commodity Index of 22 energy, agriculture and metal products added 0.2 percent, capping the biggest weekly gain in a year.

Gold futures dropped 2.5 percent on speculation the Fed will move toward the first interest-rate increase since 2006.

Greek stocks fell for a second day, trimming the biggest weekly rally since November to 11 percent. The yield on 10-year bonds rose 41 basis points to 9.9 percent.

After European markets closed, S&P lowered Greece’s long-term credit rating one level to B- and kept the ratings on CreditWatch negative. Prime Minister Alexis Tsipras will lay out his plans for debt relief on Sunday after the European Central Bank cut off preferential funding for the nation’s lenders and initial talks with Germany failed.

The Stoxx Europe 600 Index added 0.2 percent, rising for a fifth day and extending its weekly advance to 1.7 percent. The MSCI All-Country World Index had its biggest weekly gain since October, despite a drop of 0.4 percent on Friday.

European Stocks

GlaxoSmithKline Plc rose 1.1 percent after reporting positive results from a trial combining two cancer drugs it’s selling to Novartis AG. Shares of the Swiss company climbed 1.9 percent.

Russia’s dollar-denominated RTS Index of stocks climbed 2.7 percent and rallied 12 percent over five days. The Micex Index rose 3.5 percent, up 6.5 percent in five days to the highest level since 2011. The ruble slipped 0.9 percent, trimming this week’s gain to 3.2 percent.

China’s stocks fell, dragging the benchmark index to its longest weekly losing streak since May. The Shanghai Composite Index slumped 1.9 percent, slipping 4.2 percent this week. The gauge’s third straight weekly decline came after manufacturing and services gauges signaled a worsening outlook for the economy and as 24 companies prepared to sell shares in initial public offerings next week. Chinese stocks failed to sustain gains on Thursday following a cut in banks’ reserve ratio.

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