US jobs growth: Wall Street worries Delta fears weigh

A positive jobs report drove US stocks modestly higher Friday, but a parallel rise in Treasury yields signaled a downside: the good news could push the Federal Reserve to curtail its massive stimulus policies faster then expected.

Nonfarm payrolls increased by 943,000 in July after rising 938,000 in June, the Labor Department said in its closely watched employment report, pushing unemployment down to 5.4 per cent and suggesting the economy maintained its strong momentum.

Economists polled by Reuters had forecast payrolls increasing by 870,000 jobs.

“It’s a number that’s hard to say anything but positive things about,” said Sameer Samana, a market strategist at Wells Fargo Investment Institute in St. Louis. “Especially with the Delta variant kind of perking up, it would be much more confidence-building for the market to have a very strong economy.” Still, stock gains were muted. The Dow Jones Industrial Average rose 144.39 points, or 0.41 per cent, to 35,208.64, the S&P 500 gained 7.44 points, or 0.17 per cent, to 4,436.54 and the Nasdaq Composite dropped 59.36 points, or 0.4 per cent, to 14,835.76.

Some investors believe the robust jobs numbers could support the view that the Fed, faced with rising inflation and strong growth, may need to unwind its ultra-easy monetary policies sooner than expected. Such an outcome could push yields higher while denting growth stocks and other areas of the market.

“This good news brings pain for the bond market. The dollar will strengthen and yields will go up and that could cap stocks a bit,” said Peter Cardillo, an economist with Spartan Capital Securities in New York.

Benchmark 10-year Treasury yields rose to 1.3019 per cent, a week high after their US close at 1.217 per cent on Thursday. Yields have been under 2.0 per cent since July 2019.