NEW YORK, July 7 Reuters Investors are on edge ahead of Friday39;s U.S. jobs report after more evidence of economic resilience cemented expectations of higher rates for longer and sent yields to a 16year high.

Unexpected strength in the labor market, which showed private payrolls surged in June, sent the twoyear U.S. Treasury yield, which typically moves in step with interest rate expectations, to 5.120 on Thursday, the highest since June 2007. Traders in U.S. interest rate futures markets bumped up the probability of another rate increase by the Federal Reserve in November.

It39;s counterintuitive, but strong data increases the odds that we will have to go into a recession to break inflation, said Jack McIntyre, a portfolio manager at Brandywine Global.

The SP 500 Index, fell 0.8 on Thursday, pulling back from a more than 1year high touched earlier this week.

We are clearly in a phase where strong data is not good for equities, said McIntyre.

Attention now turns to the June jobs numbers on Friday, which could mark another big move for stocks. The SP 500 has logged an average move of 1.2, in either direction, on nonfarm payrolls report days, compared with an average move of 0.9 for all days over the past year.

According to a Reuters survey of economists, nonfarm payrolls likely increased by 225,000 jobs last month after rising 339,000 in May. The unemployment rate is forecast slipping to 3.6 from 3.7 in May.

MOVING MARKETS

Economic data has been an outsized…