Whiplashed Wall Street muted after mixed US payrolls data

U.S. stocks and Treasuries were muted on Friday as investors sought to interpret mixed messages of payrolls numbers and its potential impact on Federal Reserve policy in the final session of a roller-coaster first trading week of the year.

U.S. employment rose by a less-than-expected 199,000 jobs last month as the impact of a resurgent pandemic bites, well below the 400,000 forecast by economists, but data for November was revised higher. The unemployment rate dropped to 3.9%, underscoring tightening labour market conditions.

"The investor takeaway is that the labor market continues to be tight despite the headline miss. Wages are rising. Jobs are still growing," said Michael Arone, chief investment strategist at State Street Global Advisors in Boston.

"Investors are anticipating that the Fed will raise rates and continue quantitative tightening. Investors are concerned the Fed will be more aggressive than expected."

The Dow Jones Industrial Average fell 26.46 points, or 0.07%, to 36,210.01, the S&P 500 lost 1.15 points, or 0.02%, to 4,694.9 and the Nasdaq Composite added 13.74 points, or 0.09%, to 15,094.60.

It has already been a confusing week for stocks. After a start to 2022 marked by new highs, the mood changed on Wednesday after minutes from the Fed's December meeting signalled the central bank may have to raise interest rates sooner than expected.

Wall Street steadied by Thursday evening, though analysts at ING bank said the minutes were still reverberating across markets, driving bond yields higher, hitting growth stocks and supporting the dollar.

The MSCI All Country stock index was up about 0.3% at 746.3 points, though still down around 2% from a record high on Tuesday. In Europe, the STOXX index was off 0.3% at 486.4 points, also off about 2% from a record high on Tuesday.

Treasury yields soared anew on Friday in choppy trading after the mixed U.S. nonfarm payrolls. Analysts said the report was solid enough to keep the Federal Reserve on track to raise interest rates at its March meeting.

"In terms of any effects on monetary policy, it's going to be minimal at best right now because the path for monetary policy right now is pretty clear cut," Art Hogan, chief market strategist at National Securities in New York, said in response to the jobs report.

The yield on benchmark 10-year Treasury notes was last at 1.762%, from 1.7461% before the payrolls data release.

Euro zone inflation rose unexpectedly last month to 5% from 4.9% in November, a record high for the currency bloc, though unlike the Fed, the European Central Bank says prices will ease enough this year to avoid the need for rate hikes.

The dollar index fell 0.34% at 95.920. Even with Friday's weakness, the dollar was still on track for a weekly gain, its first in three weeks.

Oil prices ticked up, which some analysts linked to news that Russian paratroopers had arrived to quell unrest in Kazakhstan, though production in the OPEC+ producer country remains largely unaffected so far.

Continuing their large gains to start 2022, U.S. crude rose 0.08% to $79.52 per barrel and Brent was at $82.20, up 0.26% on the day.

Spot gold stood at $1,791 an ounce, slightly firmer on the day after touching a two-week low of $1,788.25 on Thursday, as rising U.S. Treasury yields hurt demand for the non-interest bearing metal.

Bitcoin slumped as much as 5% on Friday to its lowest since late September, amid a broader sell-off for cryptocurrencies driven by concerns about tighter U.S. monetary policy.

Bitcoin was last down more than 3% at $41,669 after touching $40,938, its lowest since Sept. 29, as a mixed bag of U.S. payrolls data fuelled some bargain buying.

(Reporting by Lawrence Delevingne in Boston and Huw Jones in London. Additional reporting by Sinead Carew in New York.)