Stocks retreated from earlier highs as last week's blowout labor market report was initially seen as a sign the economy could withstand aggressive interest rate hikes by the Fed to tame inflation running at four-decade highs.
Spot gold was down 0.1% at $1,772.27 per ounce, as of 0303 GMT, after dropping 1% in the previous session. U.S. gold futures eased 0.1% to $1,790.
US employers added 528,000 jobs last month, more than all estimates, the unemployment rate fell to a five-decade low of 3.5%, and wage growth accelerated
The dollar hovered near its highest this week after Federal Reserve officials continued to stress that policy tightening is far from over. However, Treasury yields remained down from two-week highs as investors stayed sidelined ahead of employment data this week that will guide the path of interest rates.
The greenback continued its rise versus the safe-haven yen, extending its best gain for six weeks, as U.S. Treasury yields also rebounded after House Speaker Nancy Pelosi's arrival in Taiwan was met with a strong, but not off-the-scale response by China.
The report likely won't change Fed Chair Jerome Powell's view that an economy that is adding hundreds of thousands of jobs a month is not in recession, and won't deter him from raising borrowing costs further
In May and June, big gains were followed by even bigger selloffs as investors parsed Chair Jerome Powell’s remarks and recalibrated expectations for the likely path of policy moves
Markets were extremely oversold with FIIs selling nearly $28.70 billion so far this year. This selling spree reduced in July to $146 million from more than $6.34 billion they sold in June
“While another unusually large increase could be appropriate at our next meeting, that is a decision that will depend on the data,” Powell said. “The labor market is extremely tight, and inflation is much too high.”
The moves, which will be effective from Thursday, follow the U.S. Federal Reserve's decision to raise its target interest rate by three-quarters of a percentage point for a second consecutive month to tame soaring inflation.
Quarterly reports from Microsoft Corp (MSFT.O), Alphabet Inc (GOOGL.O) and others added to the day's upbeat tone.
As expected, the U.S. Federal Reserve raised rates 75 basis points to 2.25-2.5% but did note some softening in recent data.
As he explained the logic behind the stiffest interest rate increases in roughly four decades, Fed Chair Jerome Powell was peppered with questions about whether the U.S. economy was in or on the cusp of a recession - a notion he rejected because U.S. firms continue to hire in excess of 350,000 additional workers each month.
An analysis of policy rates in Asia Pacific versus their five-year averages shows a high degree of vulnerability across the region, as does an examination of interest rates adjusted for inflation, and yield spreads versus US Treasuries.
Spot gold was up 0.3% at $1,724.45 per ounce, as of 0311 GMT. U.S. gold futures gained 0.3% to $1,723.60 per ounce.
MSCI's broadest gauge of Asia stocks outside Japan meandered just above flat. Japan's Nikkei fell 0.2% and S&P 500 futures were down 0.4%.
The Nasdaq ended lower, and S&P 500 technology (.SPLRCT) and consumer discretionary (.SPLRCD) led declines among major S&P sectors. The energy sector (.SPNY) gained along with oil prices.
Spot gold had climbed 0.4% to $1,713.49 per ounce by 0254 GMT, after falling to its lowest in nearly a year last week. U.S. gold futures gained 0.5% to $1,711.80.
The dollar index, which measures the currency versus six counterparts, edged 0.07% higher to 108.65, after reaching and then falling back from the highest since September 2002 at 109.29 on Thursday.
Spot gold fell 0.2% to $1,731.19 per ounce by 0312 GMT. U.S. gold futures dropped 0.5% to $1,727.30.
The greenback charted new 24-year highs above 128 yen and edged back toward parity with the euro, after briefly breaching the level overnight.
Michael Barr, a former top Treasury official under President Barack Obama, is the last of President Joe Biden’s three nominees to the Fed’s board of governors to win Senate confirmation.
"Everything is in play," Atlanta Fed President Raphael Bostic told reporters in Florida, when asked about the possibility.
While all three major U.S. equity indexes bounced off lows reached early in the day, and occasionally edged into positive territory throughout the session, they were all red by the closing bell.
The consumer price index for June will be released on Wednesday. It is expected to show an 8.8% increase from a year earlier, marking the largest jump since 1981, according to the median forecast in a Bloomberg survey.