The US jobs report came out stronger, but again there were some ambiguous/less strong elements.
- Nonfarm Payrolls rose 272K versus estimates of 185K.
- Private salaries increased by 229,000 compared to 170,000 according to estimates
- Average hourly earnings increased by 0.4% versus 0.3% expected
- Average year-over-year earnings increased by 4.1% versus 3.9% expected
These were the stronger than expected parts of the report.
The non-strong parts were:
- The unemployment rate rose to 4.0% from 3.9%.
- The household survey used to calculate the unemployment rate showed that the level of people who reported having jobs fell by -408,000.
- The household survey also showed that full-time workers decreased by -625,000, while the number of part-time workers increased by 286,000.
The household survey is usually more volatile than the establishment survey, which showed large payroll gains.
Schwab's Liz Ann Saunders told CNBC:
“On the surface, (the report) was hot, but there's also a bigger decline in domestic employment. For what it's worth, that tends to be a more accurate signal when you're at an inflection point in the economy. You can find weakness in the underlying numbers.”
Next week, markets will get the Fed's take on the report when it announces its interest rate decision on Wednesday. The Federal Reserve is expected to keep interest rates unchanged. The market will focus on the Federal Reserve's interest rate expectations at the end of the year. At the March meeting, they still saw 3 cuts. This will likely be reduced to 1-2 (market is about 40 point cuts between now and the end of the year).
Market reaction today saw the dollar rise 0.52% to 1.53% against the major currencies. The New Zealand dollar and Australian dollar were sold off and commodities were also sold off. China's gold purchases fell last month, and a stronger dollar and higher yields gave sellers another reason to sell commodities. This tends to weaken the New Zealand dollar and the Australian dollar, whose economies are more dependent on commodities.
From strongest to weakest.
- Today, gold prices fell -$82, or -3.45%, to $2,293.49. The % decline was the largest since November 6, 2020.
- Silver prices felt -$2.14 or -6.88% to $29.14 which was the worst % decline since February 2021.
- Copper prices also fell sharply with a decline of -4.82%.
Bitcoin price reached an intraday high of $71,949, but is currently trading at $69,156. Ethereum is trading at $3,684.80 after hitting a high of $3,839.70.
Yields rose, erasing some of the declines seen this week
- The two-year yield is 4.888%, +15.9 basis points. The two-year yield was virtually unchanged over the week
- 5-year yield 4.462%, +17.1 basis points. The yield decreased by -4.6 basis points during the week.
- 10-year yield 4.435%, +15.5 basis points. The yield fell by -6.7 basis points during the week.
- The 30-year yield was 4.554%, and was 12.5 basis points. The yield fell by -9.6 basis points during the week.
Next week, in addition to the FOMC's interest rate decision, the US Treasury will auction 3-, 10- and 30-year coupon issues on Monday, Tuesday and Thursday, respectively. It will be difficult with the Fed's interest rate decision among the 10 30-year auctions scheduled for Tuesday and Thursday. The Fed's decision is scheduled to be announced on Wednesday.
In the US stock market today, the S&P and NASDAQ retreated from their record closing levels with modest declines, but still closed higher this week.
- The Dow Jones Industrial Average fell -0.22% on the day but rose 0.29% for the week.
- The S&P fell -0.11% on the day, but rose 1.32% on the week
- The Nasdaq fell -0.23% on the day, but rose 2.3% on the week
Thank you for your patience and support this week. Adam hopes to be back in the first half of next week. I hope everyone has a happy and safe weekend.