U.S. Stocks, Dollar Fall While Treasuries Rise on Job Losses

U.S. stocks, the dollar and oil declined while Treasuries rallied after American employers unexpectedly eliminated jobs last month, spurring concern the economic recovery will falter. The Standard & Poor’s 500 Index fell 0.4 percent to 1,136.93 at 9:41 a.m. in New York, retreating from a 15-month high. The Dollar Index, a measure of the currency against those of six U.S. trading partners, lost 0.4 percent to Jan. 8 (Bloomberg) -- The U.S. dollar fell and Treasuries rose after American employers unexpectedly eliminated jobs last month, spurring concern the economic recovery will falter. U.S. stocks rallied on optimism about corporate profits.

The Dollar Index, a gauge of the U.S. currency versus those of six major trading partners, declined 0.6 percent to 77.485 at 5:13 p.m. in New York. Treasury two-year notes advanced, driving their yield down 0.05 percentage point to 0.97 percent. The Standard & Poor’s 500 Index added 0.3 percent, recovering from a 0.5 percent drop, as United Parcel Service Inc. said profit beat its forecast and Alcoa Inc. climbed to the highest price since October 2008 before reporting quarterly results on Jan. 11.

The Labor Department said the U.S. lost 85,000 jobs in December, compared with the median economist estimate in a Bloomberg survey that called for no change in payrolls. The decrease in employment wiped out November’s gain. Federal Reserve Bank of Boston President Eric Rosengren said unemployment will stay “quite elevated” while the economy recovers, warranting continued low interest rates.

“People are still losing some jobs here, even in the fourth quarter,” said Jason Cooper, who manages $2.5 billion at 1st Source Investment Advisors in South Bend, Indiana. “The economy, it’s not as good as what people were anticipating. And I think that’s reflected in what the markets are doing.”

Higher Inventories

Benchmark U.S. equity indexes rebounded after UPS announced earnings and inventories at wholesalers unexpectedly jumped in November by the most in five years. The report on stockpiles from the U.S. Commerce Department signaled companies are picking up the pace of orders as sales climbed 3.3 percent, the biggest gain since January 2008.

Equities also recovered from their lows of the session amid diminishing bets on an interest rate increase by the Federal Reserve. Fed funds futures trading showed a 33 percent chance the central bank will lift its benchmark rate by its June meeting, down from 60 percent odds a week ago.

The dollar fell from a four-month high against the yen and dropped against all of its most-traded counterparts except for the Taiwanese dollar, falling at least 1 percent against the Brazilian real, South African rand and Swiss franc. The U.S. currency recorded its biggest weekly drop against the euro since November.

The benchmark two-year Treasury note’s yield fell as much as 0.08 percentage point, the biggest drop since Dec. 17.

Bond Auctions

The yield difference between 2- and 10-year notes widened to 2.86 percentage points, near the record 2.88 percentage points reached on Dec. 22, as the U.S. prepared to sell $21 billion of 10-year securities on Jan. 13 and $13 billion of debt maturing in 30 years on Jan. 14. The government will also sell $10 billion in 10-year Treasury Inflation Protected Securities on Jan. 11 and $40 billion of 3-year notes on Jan. 12.

Bill Gross, who runs the world’s biggest mutual fund at Pacific Investment Management Co., said the U.S. economy is too fragile for the Fed to back away from its stimulus measures.

“Four percent of the viable workforce has given up,” Gross said in Bloomberg Radio interview. “To think the economy can snap back in the face of that is a bit of a stretch.”

The S&P 500 climbed to 1,144.98, the highest level since Oct. 1, 2008. The VIX, as the Chicago Board Options Exchange Volatility Index is known, slumped to a 20-month low of 18.13. It measures the cost of insurance against losses in the S&P 500.

UPS, the world’s largest package-delivery company, rallied 4.8 after saying profit topped its estimate. Alcoa added 2.5 percent before the largest aluminum company releases fourth- quarter earnings.