U.S. Stock Futures Pare Losses After Jobs Report

By Dow Jones Business News, 

By Saumya Vaishampayan And Min Zeng

U.S. stock futures pared losses Friday after data showed U.S. job growth slowed sharply in August, a sign that investor worries about an earlier-than-anticipated increase in interest rates had eased somewhat.

The U.S. economy added 142,000 jobs in August, the Labor Department said Friday, missing expectations for a gain of 225,000 jobs. The unemployment rate ticked down to 6.1% in August from 6.2% in July, in line with expectations.

With job growth slowing to its lowest level of the year in August, the data may lead the Fed to worry about the strength of the labor market and to take its time in raising interest rates.

Dow Jones Industrial Average futures lost 40 points, or 0.2%, to 17039; they had been down around 58 points before the jobs report.

S&P 500 index futures fell three points, or 0.1%, to 1995 and Nasdaq-100 futures turned positive, up two points, or 0.1%, to 4072. Changes in stock futures don't always accurately predict stock moves after the opening bell.

In other markets, gold futures and Treasury bonds rose following the jobs report. The dollar dropped against major currencies, a reversal from recent days which saw the greenback soar against the euro and the yen.

"The report caught people off guard and pushed down bond yields," said Stanley Sun, interest rates strategist at Nomura Securities International in New York. "Many anticipated this high-profile report to show decent job growth. The Fed is going to be patient."

Strong economic indicators in past weeks had some fund managers bracing for the Federal Reserve to raise short-term interest rates earlier than expected. The relatively weak jobs growth in August put some of those fears on the back burner. However, it also raised questions about the momentum of the recovery, which has helped push the U.S. stock market to record highs.

Treasury bonds rallied on the weak jobs report. The 10-year note is 15/32 higher, yielding 2.396%. The yield was 2.487% before the report.

"This is a favorable report for the bond market," said Gary Pollack, who helps oversee $12 billion as head of fixed-income trading in New York at Deutsche Bank AG's private wealth management unit. "The labor market still has plenty of slack and the Fed is not going to raise rates any time soon."

Still Mr. Pollack said this report is inconsistent with other recent U.S. reports that have showed growth gaining momentum. The report could be revised higher next month but for now, it encouraged investors to buy bonds, he added.

Gold prices rose, with December gold futures up 0.3% to $1,270.20 an ounce. Gold, which yields nothing and costs money to hold, is seen as a less attractive investment during times of rising interest rates. Gold has also been pressured by a stronger dollar. Some investors buy gold as a hedge against dollar weakness.

In the currency markets, the euro initially rose as high as $1.2990 after the jobs report, but quickly pared gains, recently trading at $1.2958. Against the yen, the dollar fell to Yen105.71 before rising to Yen105.03 recently.

"This was more of a knee-jerk reaction," said Joe Manimbo, senior market analyst at Western Union Business Solutions. "On balance, this does subtract a little from dollar bullishness, but it certainly doesn't dampen prospects for faster U.S. growth over the second half of the year."

The European Central Bank on Thursday surprised financial markets by cutting interest rates and announcing additional stimulus measures. The moves caused the euro to tumble to a 14-month low against the dollar. Early Friday, the yen fell to its weakest level in nearly six years.

Although Friday's jobs report was worse than expected, investors say the dollar should quickly resume its upward climb because other indicators in the U.S. economy are still showing improvements. Data released earlier this week showed the country's manufacturing sector expanding at its fastest pace in more than three years.

In corporate news, Apple Inc. said it plans to increase iCloud account security. The change comes amid concerns over the security of Apple's online services after nude photos of celebrities leaked last week. Shares rose 0.6% premarket.

Nicole Hong and Ira Iosebashvili contributed to this article.

  (END) Dow Jones Newswires
  Copyright (c) 2014 Dow Jones & Company, Inc.

This article appears in: US Markets , Bonds , Economy , International , Commodities

Referenced Stocks: AAPL , DB , DBK

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