Wall Street Holds Steady as Yields Rise

NEW YORK (AP) -- Wall Street is holding relatively steady Friday after a report showed a strong job market is still powering the economy, even if it may be a touch too strong.

The S&P 500 was 0.1% higher in early trading but still on track for its first losing week in the last 10. The Dow Jones Industrial Average was down 4 points, or less than 0.1%, as of 9:40 a.m. Eastern time, and the Nasdaq composite was 0.1% higher.

Treasury yields climbed in the bond market after the jobs report showed U.S. employers unexpectedly accelerated their hiring last month. Average hourly pay for workers also rose, when economists had been forecasting a dip.

Such strong numbers are good news for workers, and they should keep the economy humming. That's a positive for corporate profits, which are one of the main things that set prices for stocks.

But Wall Street's worry is the strong data could also convince the Federal Reserve that upward pressure remains on inflation. That in turn could mean the Fed will hold interest rates high for longer than expected. That could be bad news for markets that have already rallied strongly on expectations the Fed will cut rates deeply this year. Interest rates affect the other big factor setting stock prices.

The jobs report forced traders to pare expectations that cuts to rates will begin in March. They're now betting on a 56% chance of that, down from nearly 89% a week ago, according to data from CME Group.

The yield on the 10-year Treasury swept back to 4.05%, up from 4.00% late Thursday and from less than 3.80% last week. High rates and yields slow the economy by discouraging borrowing and spending. They also hurt prices for investments and raise the pressure on the financial system.

This week's pullback for stocks is not a surprise for many on Wall Street, who had been calling its big run since autumn overdone. Critics say the number of rate cuts traders are betting on for 2024, which is double the three that the Federal Reserve has indicated, is unlikely unless a recession occurs.

On Wall Street, Constellation Brands climbed 2.5% after the seller of Corona and Modelo beers in the United States reported stronger profit for the latest quarter than analysts expected.

In stock markets abroad, indexes were mostly lower in Europe after data showed showed inflation rose to 2.9% in December. The rebound after seven straight monthly declines fueled debate over how soon the European Central Bank could cut its own interest rates.

Indexes were also lower across much of Asia. Japan's Nikkei 225 was an exception and rose 0.3%. Japanese exporters are betting a boost from the falling value of the yen against other currencies.

The yen has weakened in recent days amid speculation the Bank of Japan might go slowly on changing its ultra-aggressive policy on interest rates following Monday's major earthquake in central Japan.