Stocks, oil retreat as jobs data foreseen
New York - Another round of strong US economic data lifted the dollar Friday, but oil prices fell and equities retreated as the upbeat figures were not entirely unexpected.
A fairly robust US employment report for December - the unemployment rate fell to 8.5% from a revised 8.7% in November, its lowest since February 2009 - offered the strongest evidence yet of an accelerating US economy.
Still, US stocks fell and US Treasuries erased early losses to turn higher. Crude futures also pared early gains and retreated as the dollar gained.
The US unemployment data was not totally unexpected after a strong private payrolls report on Wednesday, said Michael Marrale, a managing director at RBC Capital Markets in New York.
“The number was actually good, but it hit the whisper,” Marrale said. “So, it’s in line with what people were expecting.”
The Dow Jones industrial average was down 0.43%, Standard & Poor’s 500 Index was down 0.37% and the Nasdaq Composite Index was down 0.10%.
The dollar got a big boost against the euro and the yen on the employment data, which helped drive the euro to a near 16-month low against the US currency.
The US Dollar Index was up 0.50% at 81.338, while the euro was down 0.60% at $1.2703.
Strong economic data in the past had helped the euro as investors became more tolerant of risk. But now, investors are focusing on the divergence between the euro zone and U.S. economies, with the euro zone seen heading toward recession.
Eurozone retail sales fell and economic sentiment soured at the end of 2011, pointing to recession. Retail sales for the bloc fell a worse-than-expected 0.8 percent in November from October, data from the European Union’s statistics office Eurostat showed.
The market is seen staying on edge and the euro under pressure ahead of Italian and Spanish government bond sales next week, viewed as the year’s first big fundraising tests for struggling euro zone countries.
“We’d gone a long time where good data was, paradoxically, not good for the dollar,” said Robert Sinche, global head of currency strategy at RBS in Stamford, Connecticut. “It looks like we may be turning the corner on that. We are at the point where the divergence in U.S. growth and the rest of the world is becoming noticeable.”
Bonds rose after Federal Reserve Bank of New York President William Dudley said more monetary accommodation should be considered to help the housing sector and stimulate the country’s “frustratingly slow” economy.
The 30-year bond price gained of 27/32, leaving its yield at 3.02 percent. Benchmark 10-year notes rose 10/32, putting their yields back below 2 percent at 1.96 percent.
Dudley told the New Jersey Bankers Association Economic Forum that the U.S. unemployment outlook was still unacceptably high.
“Overall, the employment report was strong, but a lot of work is needed to get unemployment down to a more a normal level,” said Eric Stein, vice president and portfolio manager at Eaton Vance Investment Managers.
Brent crude futures fell 43 cents to $112.31 a barrel. U.S. light sweet crude oil fell 68 cents to $101.13 per barrel.
Spot gold prices fell $12.90, or 0.80 percent, to $1609.60.