August 2, 2013 / 12:51 AM / 4 years ago

U.S. stocks edge higher; bond yields, dollar slip on jobs data

A trader works on the floor of the New York Stock Exchange, July 29, 2013.Shannon Stapleton

NEW YORK (Reuters) - Slower-than-expected U.S. jobs growth pushed Treasury yields and the dollar lower while stocks turned upward in late trading on Friday as investors grew cautious on the outlook for U.S. economic growth and Federal Reserve plans for trimming stimulus.

The number of jobs outside the farming sector increased by 162,000 in July, although the unemployment rate fell to 7.4 percent, its lowest in over four years. The result was below the median forecast in a Reuters poll for 184,000 new jobs.

"Nothing in the jobs report says the economy is standing on its own. It was a confusing jobs report and it pushes tapering a little bit deeper into the fourth quarter," said Ron Florance, deputy chief investment officer at Wells Fargo Private Bank in Scottsdale, Arizona, in reference to expectations of the Fed's stimulus wind-down.

Global markets suffered wild swings in May when the Fed indicated it might wind down easy monetary conditions. The Fed risks panicking markets again if it withdraws stimulus before the U.S. economic recovery is well established, the IMF warned in a report.

After languishing for most of the New York session on the disappointing jobs number, U.S. benchmark indexes closed up as stock investors considered the Fed may leave stimulus in place a little longer than anticipated.

The Dow Jones industrial average .DJI unofficially ended up 30.34 points, or 0.19 percent, at 15,658.36. The Standard & Poor's 500 Index .SPX was up 2.80 points, or 0.16 percent, at 1,709.67. The Nasdaq Composite Index .IXIC was up 13.84 points, or 0.38 percent, at 3,689.59.

European shares .FTEU3 erased gains after the U.S. data but then recovered some of the drop, with the FTSEurofirst 300 closing up 0.3 percent. Earlier, the index touched a two-month high on a rally in insurers after earnings reports from AXA (AXAF.PA) and Allianz (ALVG.DE).

The MSCI world equity index .MIWD00000PUS was last up 0.5 percent.

The benchmark 10-year U.S. Treasury note, which was in negative territory before the jobs report, gained 28/32 of a point, its yield easing to 2.6017 percent.

A pedestrian holding an umbrella walks past a stock quotation board displaying various stock prices outside a brokerage in Tokyo July 29, 2013.Yuya Shino

Traders of short-term U.S. interest-rate futures boosted bets that the Federal Reserve will wait until 2015 before raising short-term borrowing costs. {L1N0G30FV].

Italian bonds braved growing political uncertainty after Italy's top court upheld a jail sentence for former Premier Silvio Berlusconi that could throw the country's coalition into crisis.

Italian government bond yields were last at 4.269 percent.

An investor smokes in front of an electronic board showing stock information at a brokerage house in Shanghai June 25, 2013.Aly Song


The dollar fell against the euro and yen. It was last at 98.83 yen, down 0.7 percent, and $1.3282 against the euro, a gain of 0.6 percent for the common currency.

"The report takes away more than it offers in the sense that it means that the decision to taper QE3 in September has become that much more difficult for the Federal Reserve," said Christopher Vecchio, currency analyst at DailyFX in New York. "As we learned after this Wednesday's FOMC policy meeting, the Fed isn't exactly excited about where the U.S. economy is right now."

Spot gold fell as much as 1.9 percent to $1,282.69 an ounce ahead of the data but was last down 0.1 percent at $1,308.29.

U.S. crude oil futures fell 1 percent to $106.79 a barrel but were still heading for 1.9 percent rise on the week.

Brent crude oil reached a four-month peak of $110.09 a barrel and a weekly increase of 1.5 percent after two weeks of losses as the improving economic outlook for the world's biggest consumer added to concern over supply disruptions in Iraq, Libya and Nigeria.

Reporting by Nick Olivari; Editing by James Dalgleish, Dan Grebler and Andrew Hay

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