US stocks dropped on Friday following a stronger-than-expected May jobs report that caused bond yields to rise. The economy added 272,000 jobs in May, surpassing economist predictions of 180,000. Average hourly earnings also increased to 4.1% annually from 3.9%. The 10-year US Treasury yield surged by 11 basis points to 4.40% in response to the report.
Despite the positive job numbers, the unemployment rate rose to 4.0% from 3.9% due to a decrease in labor participation, marking the highest rate since January 2022. The robust job gains dampened expectations of an immediate interest rate cut by the Federal Reserve, although chances of a cut in September are still possible.
The CME FedWatch Tool indicates a 50% likelihood of an interest rate cut in September, down from 55% prior to the release of the jobs report. Carson Group strategist Sonu Varghese noted that the May jobs report shows the consumer is generally in good shape, with strong job and wage growth.
In other market news, West Texas Intermediate crude oil remained steady at $75.55 a barrel, while Brent crude dropped to $79.75 a barrel. Gold prices fell by 2.08% to $2,341.20 per ounce. The 10-year Treasury yield rose to 4.40%, and Bitcoin increased by 0.81% to $71,342.
Overall, the market reaction to the May jobs report suggests a positive outlook for the economy and consumer sentiment.