Dow Average Tops 17,000, Treasuries Sink After Jobs Data

Bloomberg

Declining unemployment and a pledge that European interest rates will stay low jolted the Dow Jones Industrial Average above 17,000 for the first time, lifted the dollar and sent bonds lower.

The Standard & Poor's 500 Index (SPX) added 0.3 percent to extend an all-time high at 10:20 a.m. in New York, while the Dow average climbed to 17,046.90. The Stoxx Europe 600 Index added 0.8 percent, headed for the biggest three-day rally in 10 weeks, while emerging stocks declined for the first time in four days. The Bloomberg Dollar Spot Index climbed 0.3 percent and the yield on 10-year Treasuries rose three basis points to 2.65 percent. Gold fell the most since May. The Swedish krona slid 1.5 percent to 9.2989 per euro.

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The U.S. unemployment rate fell to an almost six-year low of 6.1 percent, underscoring a brighter U.S. labor market that will help spur the economy. ECB President Mario Draghi said the central bank sees rates at current levels for an extended period after policy makers left borrowing costs unchanged at record lows. Sweden's currency tumbled the most since 2011 after the central bank cut borrowing costs by more than analysts estimated.

"This is a pretty strong report," said Jim Paulsen, chief investment strategist at San Francisco-based Wells Capital Management, in a phone interview. "This is stuff that is going to lead to upward revisions of second quarter growth rates and it starts off the third quarter in a real positive momentum place."

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Inflation Watch

The U.S. added 288,000 jobs following a 224,000 gain the prior month that was bigger than previously estimated, Labor Department figures showed. The median forecast in a Bloomberg survey of economists called for a 215,000 advance. The jobless rate is the lowest since September 2008.

Another report from the Institute for Supply Management showed services industries, which make up almost 90 percent of the world's largest economy, expanded last month at slower pace than economists in a Bloomberg survey estimated.

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U.S. 10-year note yields rose to the highest in two months as the jobs data led to speculation inflation pressure may be building.

"The Fed should take notice," Richard Schlanger, who helps invest $20 billion in fixed-income securities as vice president at Pioneer Investments in Boston. "It's just more evidence that there's underlying improvement in employment and it's not quite as dire as Yellen thinks it is. We seem to have definitely turned the corner here."

Equity Records

Federal Reserve Chair Janet Yellen said on June 18 that policy makers planned to hold interest rates near zero for a "considerable time" as slack in the jobs market kept inflation below ts 2 percent target. The central bank has held its benchmark rate near zero since December 2008.

U.S. benchmark indexes have extended a rebound from a selloff earlier this year that started with biotechnology and small-cap stocks. The S&P 500 rallied 8.8 percent through yesterday since reaching a two-month low in April as central bank stimulus spread from Europe to Japan and the U.S.

Among stocks moving today, financial firms jumped 0.7 percent, led by 500, led by online broker E*Trade Financial Corp. and insurer Lincoln National Corp. Life insurers such as Lincoln and No. 1 MetLife Inc. benefit from higher bond yields, which allow them to invest clients' premiums at higher rates.

Paccar Inc. added 5.3 percent amid speculation that the maker of Kenworth and Peterbilt trucks may receive takeover interest from Volkswagen AG, which denied it. PetSmart Inc. jumped 12 percent after Jana Partners LLC disclosed a new activist stake and urged the retailer to explore strategic options including a sale.

Draghi Comments

The ECB left its benchmark interest rate at 0.15 percent as predicted by all economists surveyed by Bloomberg News. Stocks rallied on June 5 after Draghi announced new measures to stimulate lending and said the central bank would begin preparations related for an asset-purchase plan.

Draghi reiterated that he'll keep interest rates low as officials try to revive the region's economy with a new round of emergency measures.

The Stoxx 600's gain today pushed its three-day advance to 1.9 percent, the most since April. Three shares rose for every one that declined.

Ingenico Group climbed 10 percent after the French maker of payment terminals said it's in talks to acquire online payment-service provider GlobalCollect. K+S AG advanced 2.4 percent after Europe's largest potash supplier said it will expand its specialty-fertilizer and salt businesses. Balfour Beatty Plc sank 6.5 percent after the British construction company said some parts of the U.K. construction business have weakened further.

Massively Dovish

The krona fell at least 0.9 percent against its 16 major peers. Sweden's Riksbank cut its benchmark rate by 50 basis points to 0.25 percent, while economists had predicted a 25 basis-point reduction. The euro was little changed at $1.3652.

Swedish 10-year bond yields dropped one basis point to 1.86 percent.

Sweden's rate decision "was massively more dovish than what most people in the market expected," said Carl Hammer, chief foreign-exchange strategist at SEB AB in Stockholm. The Riksbank wants "to engineer a weaker currency," he said. "If you deviate a lot from global monetary policy and try to run your own independent monetary policy, you run the risk of a stronger currency."

The MSCI Emerging Markets Index fell 0.1 percent from near a 14-month high as the jobs data bolstered the case for the Fed to rein in stimulus measures.

Gold retreated 0.8 percent to $1,320.20 an ounce and silver fell as demand for haven assets declined. Brent dropped 0.6 percent on speculation of more supplies out of Libya after rebels handed over two export terminals. West Texas Intermediate crude fell 0.7 percent, a sixth day of losses that would be its longest losing streak since 2012.

To contact the reporters on this story: Stephen Kirkland in London at skirkland@bloomberg.net; Jeremy Herron in New York at jherron8@bloomberg.net

To contact the editors responsible for this story: Michael P. Regan at mregan12@bloomberg.net Jeremy Herron, Stuart Wallace

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