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Stocks slip, bond yields fall after weak jobs report

January 7, 2011 | 10:58 am

Stocks are down across the board Friday, though modestly, as investors react to the disappointing  December employment report.

What's bad for stocks is a relief to the Treasury bond market, where yields are falling in part on the expectation that the economy won't accelerate to the point of boosting inflation pressures.

The Dow Jones industrial average was down 58 points, or 0.50%, to 11,638 at about 11 a.m. PST.

The 10-year Treasury note yield pulled back to 3.33% from 3.41% on Thursday.

The government's report that the economy created a net 103,000 new non-farm jobs last month -- well below the 150,000 that analysts had expected -- continues the pattern that's all too familiar to Americans: Although much of the economic data of recent months has pointed to a strengthening recovery, many employers clearly remain reluctant to add jobs.

Private-sector employers created a net 113,000 jobs last month instead of the 175,000 that analysts had expected, on average.

One bit of good news: Job gains in October and November were revised higher. The November figure for non-farm payrolls, initially a very disappointing net 39,000 jobs, was revised up to 71,000. The October figure was lifted to a fairly robust 210,000 from 172,000.

So stock market bulls can justify staying the course by expecting that the December figure, too, will be revised higher.

In testimony before a Senate panel on Friday, Federal Reserve Chairman Ben S. Bernanke stayed on point: He said the central bank has seen "increased evidence that a self-sustaining recovery in consumer and business spending may be taking hold," but that "conditions in the labor market have improved only modestly at best."

In other words, the Fed sees no reason to pull back the support it’s providing the economy via rock-bottom short-term interest rates and its Treasury-bond purchase program.

-- Tom Petruno