Burst of hiring drives bonds lower; stocks slip

'Today's report clears the Fed for liftoff,' one economist says

A burst of hiring last month led to a drop in the bond market Friday as traders placed bets that the Federal Reserve would raise interest rates later this year. Despite the good economic news, the stock market drifted to another loss, finishing lower for the second week in a row.

The Labor Department reported that U.S. employers added 280,000 workers to their payrolls in May and also tweaked its estimate of hiring in March and April, raising hiring numbers for the two months by a combined 32,000.

Traders reacted immediately to the report, dropping U.S. government bonds and shooting yields up. The benchmark 10-year Treasury note bounced to a high for the year, 2.43 percent, before drifting back to 2.40 percent. The dollar gained strength against the Japanese yen and other major currencies.

“I was pleasantly surprised,” said Russell Price, Ameriprise Financial's senior economist. “This adds to the recent spate of positive data that shows the economy is really pulling out of its winter slump.”

But major stock indexes finished mixed. The Dow Jones industrial average fell 56.12 points, or 0.3 percent, to 17,849.46.

The Standard & Poor's 500 index lost 3.01 points, or 0.1 percent, to 2,092.83, while the Nasdaq edged up 9.33 points, or 0.2 percent, to 5,068.46.

Big banks and other companies that benefit from rising interest rates made gains: JPMorgan Chase, Wells Fargo, PNC Financial Services hit all-time highs.

Jeremy Zirin, head of investment strategy at UBS Wealth Management, said the rapid rise in interest rates over recent months has unsettled some investors. In April, when traders were more concerned about the strength of the global economy, the yield on the 10-year Treasury slipped below 1.90 percent.

In general, a rise in interest rates reflects economic growth, but a quick leap could slow the economy down by triggering a sudden drop in lending.

Zirin said investors “want to see the rise in bond yields be more tempered. They can handle higher interest rates as long as they come at a measured pace.”

In Europe, markets were rattled by Greece's decision to bundle together its upcoming payments to the International Monetary Fund. The move heightened concerns that the country could default on its debts and drop the euro. It was the first time a developed country has taken the option of rolling debt payments together, an emergency move last taken up last by Zambia in the 1980s. At an emergency session of Greece's parliament on Friday, Prime Minister Alexis Tsipras said his government cannot accept “irrational” proposals like one made this week by the international organizations overseeing Greece's bailout.

Greece's stock market led the way lower. The benchmark Athens index slumped 5 percent. Elsewhere, both France's CAC 40 and Germany's DAX ended with a loss of 1.3 percent. Britain's FTSE 100 sank 0.8 percent.

Japan's Nikkei 225 finished with a drop of 0.1 percent, and South Korea's Kospi fell 0.2 percent. In China, Hong Kong's Hang Seng dropped 1.1 percent, and the Shanghai Composite Index gained 1.5 percent.

Precious and industrial metals futures settled mostly lower. Gold lost $7.10 to $1,168.10 an ounce, and silver slipped 12 cents to $15.98 an ounce. Copper picked up a penny to close at $2.69 a pound.

In other commodity trading, the price of oil rose 2 percent following news that the number of rigs drilling for oil in the U.S. decreased. Benchmark U.S. crude rose $1.13 to close at $59.13 a barrel in New York. Oil finished the week down 1 percent. Brent crude, a benchmark for international oil used by many U.S. refineries, rose $1.28 to close at $63.31 in London.

In other futures trading on the New York Mercantile Exchange:

— Wholesale gasoline rose 4.9 cents to close at $2.030 a gallon.

— Heating oil rose 2.6 cents to close at $1.870 a gallon.

— Natural gas fell 3.6 cents to close at $2.590 per 1,000 cubic feet.

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