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The addition of a stronger-than-expected 243,000 jobs to nonfarm payrolls in February sparked strong selling in U.S. Treasuries securities on Friday. This was the highest number of jobs added since November, and it supported the Fed's rate-hike program. Although selling came in waves, interspersed by periods of calm, the bottom line was another increase in yields, which move in the opposite direction of prices. With yields at their highest levels since May 2004, lenders, who base their rates on yields, were forced to keep mortgage rates at present high levels.

The February employment report showed significant job growth, which beat the forecast for 210,000 new jobs. Hourly wages, however, came in on target, rising 0.3 percent or 5 cents an hour to $16.47. The unemployment rate in February edged up to 4.8 percent from 4.7 percent in January, but these numbers are acquired through a separate poll.

Undeniable strength in the labor market has put pressure on bonds, as a tight labor market can lead to wage inflation. This possibility has the Treasury markets pricing in more Fed rate hikes, and today for the first time, Fed funds futures are pointing to the possibility of three 25-basis-point increases by July.

In separate reports, wholesale inventories for January rose 0.1 percent -- far lower than the 1-percent increase that was forecast. Sales, however, rose 1 percent. This leaves a tight inventory situation, which could lead to an increase in manufacturing. And the U.S. Treasury reported a $119 billion deficit for February. It was noted, however, that the federal government does not take in much money during that month.

Wall Street rallies on jobs

Wall Street rallied on the employment report, which was deemed 'just right.' Some of the biggest winners of the session were some of the biggest losers earlier in the week. Among those closing up were commodities, semiconductors, home builders and utilities, which all suffered due to concerns about high interest rates. A decline in oil prices, which closed below $60 a barrel, also supported the equity markets. All three of the major indexes posted good gains, and more importantly, they held those gains from open to close. The Dow Jones, however, was the only index to close in positive territory for the week.

Gains in the Dow were widespread with only two components -- Caterpillar and Pfizer -- closing in negative territory. Only Honeywell posted a gain in excess of 2 percent, but there were 14 components that added in more than 1 percent, with American Express and Verizon leading that group.

The Nasdaq ended a long string of losses with help from gains by a number of smaller companies, many of them biotechs. Semiconductors, which have dragged on the Nasdaq of late, provided a positive force late in the day when it looked like a sell-off was in progress.

The Nasdaq itself helped the index when it was learned that the London Stock Exchange had turned down a conditional takeover offer from the Nasdaq Stock Market Exchange Inc. Stock in the Nasdaq rose 6.3 percent on the news. Google, on the other hand, had another bad session, losing 1.6 percent to close at its lowest level since October.

As of 4 p.m. EST:

The Dow Jones industrial index closed up 104.06 points (+0.95 percent) to 11,076.34; the Nasdaq composite gained 12.32 points (+0.55 percent) to 2,262.04, and the Standard & Poor's 500 index gained 9.35 points (+0.73 percent) to 1,281.58.

The 30-year Treasury bond closed down 12/32 in price with the yield rising to 4.74 percent, from 4.72 percent on Thursday.

The 10-year Treasury note closed flat in price with the yield rising to 4.75 percent, from 4.73 percent on Thursday.

The five-year Treasury note closed down 4/32 in price with the yield rising to 4.76 percent, from 4.74 percent on Thursday.

The two-year Treasury note closed down 1/32 price with the yield rising to 4.74 percent, from 4.72 percent on Thursday.

At 4 p.m. EST, average mortgage rates (zero discount points) based on rates collected nationwide were:

The 30-year conventional fixed-rate mortgage was at 6.109 percent, down from 6.126 percent on Thursday.

The 15-year conventional fixed-rate mortgage was at 5.751 percent, up from 5.743 percent on Thursday.

Coming up:

The week of March 13 is packed with market-moving economic news. One of the biggest economic indicators on tap is the consumer price index, an inflation indicator. Reports on retail sales, manufacturing, housing and consumer sentiment also could make waves.

There are no releases scheduled for Monday, which will leave the markets to carry on from Friday or look elsewhere for guidance. Over the weekend and into Monday, mortgage rates should hold near present levels due to minor increases in Treasury yields.

Carolyn Siegel

Carolyn@interest.com

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