(Updates prices to afternoon)
* Dollar rebounds from recent losses
* Jobs data seen as modestly hawkish
* Low chance of U.S. rate hike in March
* Stocks slump, led by technology shares
By David Gaffen
NEW YORK, Feb 5 (Reuters) - Global stock markets fell and
the U.S. dollar rallied after a key U.S. jobs report painted a
mixed picture of the labor market and left investors with a
muddled view on rate hike prospects.
Oil prices dipped and were set to end the week lower after
two weeks of gains.
While U.S. non-farm payrolls increased by just 151,000 jobs
last month, well below forecasts of 190,000, the unemployment
rate fell to 4.9 percent, the lowest since February 2008, and a
sharp rise in wages suggested the labor market recovery remained
on track. ECONUS
Despite the weak headline figure, the rest of the report was
taken hawkishly by markets. Fed funds futures contracts showed
traders boosted chances of a Fed rate hike in December to about
40 percent. Before the report, they expected the Fed to wait
until well into next year before raising rates.
The report helped the dollar rebound from two days of losses
that forced the unwinding of large bets in favor of the
greenback against other currencies worldwide. The dollar had
weakened in recent days after dovish commentary from Fed
officials, but some believe this report changes the calculus
somewhat.
The increase in hourly wages and decline in the unemployment
rate "serves as a caution to markets that it is too early to
take a Federal Reserve March hike completely off the table,"
said Mohamed El-Erian, chief economic advisor at Allianz (DE:ALVG) in
Newport Beach, California.
Wall Street was lower, led by weakness in technology shares
after poor results from data company Tableau Software DATA.N
and networking platform LinkedIn (N:LNKD) LNKD.N . The S&P 500
information technology sector .SPLRCT fell 3.2 percent.
The Dow Jones industrial average .DJI fell 222.84 points,
or 1.36 percent, to 16,193.74, the S&P 500 .SPX lost 33.49
points, or 1.75 percent, to 1,881.96 and the Nasdaq Composite
.IXIC dropped 133.94 points, or 2.97 percent, to 4,375.62.
After a weak service-sector business sentiment report on
Wednesday and dovish comments from New York Federal Reserve
chief William Dudley, U.S. money markets shifted to forecast no
move in official interest rates this year.
The Federal Reserve's own forecasts, meanwhile, still
suggest four increases by year-end, a pace many consider
unlikely, which is likely to be addressed by Fed Chair Janet
Yellen next week when she appears before Congress for
semi-annual monetary policy testimony.
The dollar index rose 0.7 percent to 97.11 .DXY , having
endured a pretty rough week. The dollar has shed 2.7 percent
this week as expectations that the Fed would raise rates at
least once this year evaporated on signs of domestic weakness
and broader concerns over global growth.
The dollar's decline was spurred by traders unwinding
complicated cross-market bets that involved borrowing in euro
and yen and buying U.S. assets.
U.S. bond yields US10YT=RR rose after the jobs report
before falling back. The 10-year yield was little changed at
1.84 percent. Shorter-dated Treasuries were weaker, causing the
yield curve to flatten, a signal of concern about economic
slowdown. The 10-year yield has still fallen by 10 basis points
since the start of this month.
Crude oil was mixed. Brent crude LCOc1 was up 0.2 percent
at $34.52 a barrel, while U.S. crude CLc1 fell 0.8 percent to
$31.47 a barrel.
(Editing by Bernadette Baum and Chizu Nomiyama)