Strong May Jobs Report Lifts Yields, Rate Hike Bets; S&P 500 Futures Decline

U.S. nonfarm payrolls surged by 172,000 in May, far exceeding the 85,000 forecast, confirming a resilient labor market and fueling expectations that the Federal Reserve will tighten monetary policy by year-end. The unemployment rate held at 4.3% for a third straight month. Treasury yields rose sharply, with the 2-year note yield jumping 10 basis points to 4.15% and the 10-year climbing 6 basis points to 4.54%. Interest-rate futures now price a 65% chance of a Fed rate hike in December, up from 48% before the report. U.S. stock index futures pointed lower, with the Nasdaq composite down 1.4% and the S&P 500 off 0.7%. The dollar index edged up 0.1% to 99.53. Analysts said the strong labor data eliminates a key restraint on the Fed, making rate cuts unlikely and increasing the risk of tightening as inflation pressures mount from the Iran conflict.