U.S. stocks fall and Treasuries gain after jobs data report

U.S. stocks fell on weaker-than-estimated jobs growth while Treasuries gained amid speculation the Federal Reserve won’t raise interest rates sooner than anticipated. The dollar fell and European shares slipped from a two-month high.

The Standard & Poor’s 500 Index (CME:SPZ14) fell 0.3 percent to 1,991.43 at 9:41 a.m. in New York. The Stoxx Europe 600 Index slid 0.5 percent, trimming a fourth weekly increase. The yield on 10-year Treasuries dropped 4 basis points to 2.41 percent. The Bloomberg Dollar Spot Index declined 0.2 percent from a 14- month.

U.S. payrolls rose 142,000 in August and the unemployment rate fell, Labor Department data showed. While the Federal Reserve is trimming bond purchases, the ECB unexpectedly lowered its key interest rates yesterday and announced an assets-buying plan, as President Mario Draghi signaled at least 700 billion euros ($906 billion) of fresh aid. Interfax reported Ukraine and separatists signed a cease-fire protocol.

“There has been an accumulation of positive surprise coming out of macro data so the jobs report runs counter to that,” Gary Pzegeo, who helps oversee $25.4 billion at Atlantic Trust in Boston, said in a phone interview. “The underlying direction of monetary policy in different parts of the world is shifting. That could be a source of volatility and uncertainty.”

U.S. employers in August added the fewest number of jobs this year, marking a pause in the recent momentum of the labor market. The 142,000 advance in payrolls was weaker than the lowest estimate in a Bloomberg survey and followed a revised 212,000 gain in July, the Labor Department figures showed. The median estimate was for a 230,000 increase. The unemployment rate fell to 6.1 percent from 6.2 percent in July, reflecting a drop in joblessness among teenagers.


Interest Rates

The Fed is gauging the strength of the labor market as it winds down a bond-buying program and considers the timing of raising interest rates. Policy officials led by Janet Yellen next meet Sept. 16-17.

Increasing evidence that the economy is strengthening has fueled speculation the Fed may raise rates sooner than investors anticipate. Yellen has said the central bank will keep rates near record lows for a “considerable time” after bond purchases end.

“Today’s report somewhat contradicts the other data that says that the economy is getting stronger.” Alan Gayle, who helps oversee $49.5 billion as director of asset allocation for RidgeWorth Investments in Atlanta, said by phone. “It promotes the argument of keeping rates lower for longer. It supports Yellen’s more measured moving away from tightening.”


European Shares

The S&P 500 slipped 0.3 percent in the previous three days after ending last month at a record. The index gained 3.8 percent in August, the biggest increase since February, and topped 2,000 for the first time. The equities benchmark trades at 16.7 times its members’ projected earnings, near a 16.8 multiple reached last week that was its highest valuation since the end of 2009.

In Europe, basic-resources companies led declines in the Stoxx 600, which trimmed its weekly advance to 1.6 percent.

London Stock Exchange Group Plc dropped 2.5 percent as Borse Dubai Ltd. is selling a stake. Postal service CTT-Correios de Portugal SA and British property broker Foxtons Group Plc fell more than 3.5 percent after investors sold shares.

The volume of Stoxx 600 shares changing hands today was 18 percent greater than the 30-day average, according to data compiled by Bloomberg.


Irish Yield

Rates on Irish notes fell below zero for the first time. Ireland’s two-year yield slipped to as low as minus 0.004 percent, the least since Bloomberg began collecting the data in 2003, meaning investors buying the securities would get less back than they paid. That’s a turnaround from 2010, when the nation requested an international bailout amid concern its banks would overwhelm the economy.

Ireland joined nations from Austria to Finland with negative yields after the ECB’s stimulus announcement yesterday. Ten-year securities rallied today, with Italy’s rate falling to a record low of 2.275 percent.

Pledging to “significantly steer” the ECB’s balance sheet back toward the 2.7 trillion euros of early 2012 from 2 trillion euros now, the central bank reduced its three main interest rates by 10 basis points yesterday.

It lowered the benchmark rate to 0.05 percent and the deposit rate to minus 0.2 percent, seeking to revive inflation that languished at 0.3 percent last month.

“The trend of the central banks is different,” said Kazuaki Oh’e, a debt salesman at CIBC World Markets Japan Inc. in Tokyo. “The Fed is thinking the next move is not easing but raising” interest rates. The result may be an end to this year’s Treasury market rally, he said. “It’s likely over.”


Dollar Index

The Bloomberg Dollar Spot Index fell after today’s jobs report, trimming its weekly advance to 0.8 percent. The euro was at $1.2973 after dropping to $1.2920 yesterday, the lowest since July 2013. The currency has tumbled 1.2 percent this week, the most since January. The euro’s eight-week losing streak is the longest since the currency began trading in 1999.

The MSCI Emerging Market Index fell for a second day, losing 0.2 percent. The gauge has advanced for a fourth week, its longest rally since May. It’s up 1 percent in the period.

The Micex Index added 1.6 percent, extending this week’s rally to 5.7 percent. The ruble strengthened 0.4 percent, leaving it 0.6 percent stronger in the five-day period.


 

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