What Unemployment Means for ETFs

Stock exchange-traded funds (ETFs) opened sharply lower after a disappointing Labor Department report intensified concerns that the economic recovery is running out of steam.

Stocks dropped early Friday after figures showed the U.S. generated far fewer jobs than anticipated in May -- another sign that recovery in the world's largest economy is slowing down. The Labor Department reported that only 54,000 jobs, less than the 125,000 expected, were created during the month and the unemployment rate rose 0.1% to 9.1%. The number of jobs created was far lower than the 165,000 expected in the markets and represents the weakest jobs creation since last September. "The employment data have confirmed the markets' worst fears about a marked slowdown in U.S. economic activity, to the extent that any one report can be relied upon," said Alan Ruskin, an analyst at Deutsche Bank. The ProShares UltraPro Short S&P 500 ETF (NYSE: SPXU  ) is up almost 2% early on Friday.

Treasury prices jumped Friday, pushing 10-year note yields back under 3%, after the Labor Department report. Yields on 10-year notes, which move inversely to prices, fell 6 basis points to 2.98%, down from 3.03% before the data report. The benchmark security's yield has fallen to the lowest since December as a string of unexpectedly weak economic data has raised concerns about a slowing U.S. economy that some worry may be heading back into recession. Analysts are wondering whether the Federal Reserve will consider another round of bond purchases in an attempt to prop up the largest global economy. The iShares Barclays 7-10 Year Treasury ETF (NYSE: IEF  ) is moderately higher in early trading.

The dollar recovered against the euro but remained lower against the Japanese yen on Friday as currency traders digested unemployment data. The Labor Department's report added to concerns that the recovery is weakening, pushing U.S. stock futures sharply lower while allowing the dollar to retain some demand as a relative safe-haven compared to riskier assets. The dollar index, which measures the greenback against a basket of six currencies, turned up to 74.375, from 74.331 before the data and 74.344 in late North American trading on Thursday. It fell to 74.143 just after the report. The PowerShares DB Dollar Index Bullish ETF (NYSE: UUP  ) is flat so far on Friday.

Greek stocks continued to rally on hopes for a new bailout package. The Greek ASE Composite index rose 1.9%, though paring some earlier gains, on speculation that an additional bailout package could be in the works for the embattled euro-zone country. Reuters reported late Thursday that senior European Union officials have agreed to a new international bailout for Greece. In return, Greece is expected to impose deeper austerity measures. The report came as EU, European Central Bank and International Monetary Fund officials were said to be wrapping up a review of Greece's implementation of reforms in return for the current $160 billion rescue plan, with an assessment expected later Friday. The iShares S&P Europe 350 Index ETF (NYSE: IEV  ) is up slightly in early trading.

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Gregory A. Clay contributed to this article.

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