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Treasury yields rise on higher payroll revisions and lower unemployment rate. A spike in oil prices also kept buyers away
Stocks ended lower on Friday, as interest rates rose on news that the unemployment rate fell in October and the number of new jobs in the previous two months were revised higher. The news was triggering fears that the Federal Reserve will have to raise rates next year, says Standard & Poor's Equity Research. Higher oil prices also weighed on stocks, says S&P.
The Dow Jones industrial average fell 32.5 points, or 0.27%, to 11,986.04. The broader Standard & Poor's 500 index lost 3.04 points, or 0.22%, to 1,364.3. The tech-heavy Nasdaq composite was down 3.23 points, or 0.14%, to 2,330.79.
In the energy markets, December West Texas Intermediate crude futures rose $1.37 to $59.25 a barrel after a U.S. consular report that Nigerian militants were planing a massive attack on the country's oil facilities, which would involve synchronized multiple strikes on 10-20 targets in the Niger delta region, reports Action Economics. The gains appeared limited, however, by an EIA report that OPEC supply cuts would have only a lagging impact, given sufficiently full winter inventories of heating oil and other products, says Action Economics.
Ahead of Tuesday's congressional elections, some investors were nervous that the Democrats will try to raise taxes if they win the races, S&P says.
Other highlights next week include economic reports on international trade and consumer sentiment. On Friday, Fed chief Benjamin Bernanke will be in Frankfurt to discuss the role of monetary policy along with other central bank leaders.
In economic news, October nonfarm payrolls rose 92,000 in October, below the forecast for a 125,000 gain. However, the number of new jobs in the previous two months were revised higher by 139,000: September payrolls rose to 148,000 from 51,000 initially, and August payrolls were raised to 230,000 from 188,000.
Among the sectors in October, manufacturing payrolls fell 39,000 and construction payrolls dropped 26,000, while service sector payroll growth remained strong, up 152,000, reports Action Economics.
The unemployment rate fell to 4.4% from 4.6% -- the lowest level since April 2001. Average hourly earnings were up 0.4% after a 0.2% increase in September (August's 0.2% was revised to 0.3%). Hours worked rose to 33.9 vs. 33.8 in September.
"This is a very strong report, despite what the headline job figure says, and should boost the dollar and yields as it reduces recession fears," says Action Economics.
In another report, the October reading of the Institute for Supply Management's non-manufacturing index rose to 57.1 in October from 52.9 in September.
Among stocks in the news, heavy equipment maker Caterpillar (CAT) warned that a significant slowdown in the housing sector could temporarily impact the company's sales.
Whole Foods Market (WFMI) fell sharply after the grocer forecasted slower revenue growth in the fiscal year ahead.
In the tech sector, Oracle (ORCL) says it will acquire Stellent (STEL) for $440 million, or $13.50 per share.
Video game maker Electronic Arts (ERTS) beat analysts' earnings estimates and guided forecasts higher.
Phone chip maker Qualcomm (QCOM) beat Wall Street estimates with a 14% profit gain, though forward guidance was disappointing.
Red Robin Gourmet Burgers (RRGB) shares plunged after the company reported a drop in third-quarter earnings as stock option expenses and other items offset 0.8% same-restaurant sales rise and 30% total revenue rise. CIBC World and Banc of America downgraded the stock.
European markets finished mixed on Friday. In London, the FTSE-100 index edged down 1.2 points, or 0.02%, to 6,148.1. Germany's DAX index gained 17.82 points, or 0.29%, to 6,241.15. In Paris, the CAC 40 index rose 26.23 points, or 0.1%, to 5,336.3.
Asian markets ended mixed. In Japan, the market was closed for a holiday. In Hong Kong, the Hang Seng index edged up 34.91 points, or 0.19%, to 18,749.69.
Treasury yields spiked higher on the strong overall employment report, which made up for the slightly disappointing headline payrolls gain after September and August payrolls were revised up by a total 139,000 jobs combined, says Action Economics. The plunge in the jobless rate to 4.4%, the 0.4% jump in average earnings and increase in the workweek also contributed to the stronger tone on the report, says Action Economics. The 10-year note yield jumped almost 12 basis points to 4.715%.