Firm Dollar, Rising Rates Pressure Commodities, Bonds and Stocks

The U.S. Dollar rose against a basket of major currencies on Friday, but still closed lower for the week. The higher close was driven by a robust jobs report that strengthened the case for additional rate hikes by the Fed later this year.

March U.S. Dollar Index futures settled at 89.036, up 0.531 or +0.60%.

The jobs data contributed to investor sentiment that inflation is picking up and higher rates are on the horizon. As a result, commodity prices declined as well as the U.S. stock and bond markets.

Gold

Gold prices fell in response to a rise in the U.S. Dollar after U.S. jobs data showed solid gains in non-farm payrolls and wages. The data could be the catalyst that drives gold prices lower over the near-term.

With benchmark 10-year Treasury yields reaching a 4-year high after the release of the data, the Fed may have to act more aggressively before the March meeting if the 10-year yield get to three percent. Higher interest rates make gold a less attractive investment because it does not pay interest.

Gold ended the week down 1.47%, after rising in six out of the last seven weeks and hitting its highest level in 17 months at $1370.50 on January 25.

Crude Oil

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures settled lower on Friday and lost ground for the week. The markets, however, continued to hover around three-year highs.

The markets posted a two-sided trade on Friday, guided almost exclusively by the price action in the U.S. Dollar. The dollar rose after the monthly jobs report surpassed expectations, showing the United States added 200,000 positions. Wages also registered the biggest one-month gain since the end of the Great Recession in mid-2009.

In other news, the U.S. oil rig count, a weekly measure of how many rig drillers are operating, increased by six this week to a total of 765, Baker Hughes reported.

U.S. Equity Indexes

The major U.S. equity indexes posted a steep decline on Friday after a stronger-than-expected jobs report drove Treasury yields higher.

The benchmark S&P 500 Index fell 2.1 percent with energy the worst performing sector. The blue chip Dow Jones Industrial Average settled 2.61% lower, its sixth-largest points decline ever. The tech-based NASDAQ Composite was down 1.96 percent. Alphabet and Amazon were able to post gains which offset weakness in Apple.