Grim jobs report aftermath: Stocks up, bonds mixed, dollar sinks, gold zooms

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The dismal November employment report -- a net 39,000 jobs created, compared with an expected 150,000 -- made for a day of strange crosscurrents in financial markets.

The highlights:

--- STOCKS: Market bulls refused to surrender, apparently unwilling to discount the barrage of upbeat economic data that preceded the lousy jobs number in recent weeks. See here, for example, and here and here.

The Dow Jones industrial average traded flat for most of the day, then rallied in the final half hour and closed up 19.68 points, or 0.2%, to 11,382.09. The Dow was up 2.6% for the week.

The broader market also posted gains Friday. The Nasdaq composite index added 0.5% to end at a new three-year high of 2,591.46, and the small-stock Russell 2,000 index closed at a 2 1/2-year high, rising 0.7% to 756.42.

Economists at brokerage UBS, arguing that the government’s data stand in “stark contrast to most other employment measures,” said they were sticking with their forecast of job gains averaging 150,000 a month in 2011.

--- BONDS: Some investors and traders immediately flooded into the Treasury market after the report was released, taking it as a sign that the economy isn’t getting any real traction where it counts -- putting people to work. At a minimum, that boosts expectations that the Federal Reserve won’t be raising interest rates anytime soon, making many investors feel safer about buying government bonds at current yields.

The yield on three-year Treasury notes fell to 0.77% from 0.84% on Thursday. The five-year T-note dropped to 1.62% from 1.67%.

Yields also fell on longer-term Treasuries after the employment data. But investors soon reconsidered: If the Fed feels compelled to pump even more money into the financial system to try to bolster job growth, it could reignite longer-term inflation worries.

Bank of America Merrill Lynch economists said they now expect the Fed to launch yet another “quantitative easing” program of Treasury bond purchases once the current much-criticized $600-billion program wraps up in June.

The 10-year T-note edged up to a four-month high of 3.01%, from 3.0% on Thursday. The 30-year T-bond rose to 4.32% from 4.26%.

--- DOLLAR: The greenback fell sharply, undermined by the employment report and as Europe’s financial markets continued to recover from their recent drubbing. The euro jumped to $1.342 from $1.321 on Thursday.

The DXY index of the dollar’s value against six other major currencies, including the euro, slid 1.5% to 79.10, a two-week low. The dollar had been rebounding since Nov. 4, but that turnaround may be finished courtesy of the grim jobs data.

--- COMMODITIES: Raw materials prices rallied, taking their cue in part from the dollar’s slump. A weaker dollar makes commodities cheaper for foreign buyers because most raw materials are priced in dollars.

Crude oil rose $1.19 to a new two-year high of $89.19 a barrel. Within the Reuters/Jefferies CRB index of 19 major commodities, 17 rose in the session, and the index itself gained 1.3% to 316.16, nearing the two-year high of 319.11 set on Nov. 9.

Gold jumped $16.90 to $1,405.40 an ounce, nearing its all-time closing high of $1,409.80 on Nov. 9. On a good day for commodities in general, gold got an added boost from a report that China’s gold imports in the first 10 months of this year were up five-fold from 2009.

-- Tom Petruno