"Long term it's clear the economy is stronger and equities will be back. I think the market's viewing December is (in) the rearview mirror at this point. The market's looking at what's the next move," said John Bredemus, vice president, Allianz Investment Management.
He said the rise in the 2-year yield is capped because "the Fed's going to continue to raise rates but it's going to be very slow, very gradual," he said.
Treasury yields held near highs after spiking on the jobs report. The 2-year yield held near 0.89 percent, after earlier hitting 0.958 percent, its highest level since May 2010. The 10-year yield was 2.33 percent, after hitting its highest level since July 21.
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The October report showed the addition of 271,000 jobs, soundly beating expectations of about 180,000, with the unemployment rate ticking lower to 5 percent. Average hourly earnings increased 9 cents, for an annualized increase of 2.5 percent.
However, labor force participation remained low at 62.4 percent.
"Investors will be keying in on average hourly earnings and some of the components, especially the manufacturing, which was a little less worse than expected," said Greg Woodard, portfolio strategist at Manning and Napier.
The U.S. Bureau of Labor Statistics said employment in manufacturing, wholesale trade, transportation and warehousing, information, financial activities, and government, showed little or no change over the month.
"Across the board strength makes the case for a Fed tightening in December much stronger than I would like and much stronger than I anticipated in a global economy where you still face deflationary pressure," said Krishna Memani, chief investment officer at OppenheimerFunds.
He noted increased strength in the U.S. dollar on Fed tightening would be negative for domestic growth and contribute to market volatility.
The U.S. dollar held more than 1 percent higher against major world currencies in afternoon trade. The euro fell below $1.08 and the yen weakened to 123.19 yen against the dollar.
The sharp gains in the dollar pressured oil, with crude settling down 2.01 percent, or 91 cents, at $44.29 a barrel. Gold also plunged $16.50 to end at $1,087.70 per ounce.
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Dow futures gave up earlier gains to briefly fall more than 50 points, while bond yields climbed after the data release.
Markets were pricing in an approximately 70 percent probability of a rate hike in December, up from 58 percent before the report, according to CME's FedWatch tool.
European equities ended mostly higher after the U.S. jobs report.
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Immediately following the data release, Chicago Fed President Charles Evans said on CNBC that the report was "very good news" and that strong jobs growth would help push up inflation. However, the dovish Fed speaker and voting member was not ready to say time was ripe for a rate hike.
A "very good" U.S. jobs report for October on top of faster-than-expected progress over the last year means the U.S. economy is effectively at full employment, St. Louis Fed President James Bullard said in a Reuters report Friday.
Fed Gov. Lael Brainard speaks at an IMF conference after the closing bell.