- U.S. markets ended higher as tariff concerns waned due to hopes that indefinite Canada and Mexico exclusions would provide support for constructive NAFTA negotiations. S&P 500 Index +0.5%, Nasdaq +0.4%, Dow +0.4%, Russell 2000 -0.2%.
- Consumer staples (+0.9%) was the top sector performer; aided by strength in tobacco and beverages. Energy (-0.1%) the lone negative sector as WTI prices dipped.
- Positive breadth on NYSE (1.4:1); trading volume below average (~78% of 30-day avg.).
- Treasuries strengthened; 10-yr. note yield -1 basis point to 2.87%.
- Commodities: WTI crude oil prices regressed (-1.3% to $60.33/bbl.); COMEX gold -0.4% to $1323/oz.; industrial metals continue broad decline; U.S. dollar mixed vs. major crosses.
- Economic data: U.S. jobless claims came in higher than expected (231K vs. 220K); despite miss, overall claims levels have been holding near historical lows. The Federal Reserve’s (Fed) balance sheet grew by $2.7B for the week closing at $4.39T, bringing the total reduction since October down to $41B.
Overnight & This Morning
- U.S. equities opened higher following morning’s payroll report. Figures indicated strong jobs growth, but muted wage gains (details below).
- European stocks mixed midday as markets continue to digest tariff implications. U.K. and French industrial production figures providing slight headwind to performance. STOXX Europe 600 flat, DAX -0.4%, CAC 40 flat, FTSE 100 +0.6%.
- Asian markets closed up as easing geopolitical tensions with North Korea provided price support. Bank of Japan’s (BOJ) policy announcement fell in line with expectations. Nikkei +0.5%, Shanghai Composite +0.6%, Hang Seng +1.1%.
- Treasury yields advance; 10-yr. yield +3 basis points to 2.90% in early risk-on trading.
- Commodities: Oil regaining losses (+1.1% to ~$60.8/bbl., gold -0.3% to ~$1317/oz., industrial metals lower across the board.
- Economic releases: U.S. employment report came in widely above expectations adding 313K nonfarm jobs vs. a consensus of 205K. BOJ announcement viewed as non-event; monetary policy of 0% 10-year interest rate target left unchanged. China’s Consumer Price Index numbers came in higher than anticipated (1.2% month over month vs. 0.6%).
- Jobs report blows through expectations. The Labor Department released its monthly Employment Situation report this morning, showing that the U.S. added 313k jobs in February (the most since October 2015) versus expectations of just 205k. The unemployment rate remained at 4.1%, while average hourly earnings grew by 0.1%. Year over year, wage gains decelerated from 2.8% in January (revised down from 2.9%) to 2.6%. The strong jobs growth, but contained wage inflation, helps to quell fears of rising inflation, and likely further strengthens the case that the Fed will raise rates only three times, as forecast in our Outlook 2018, instead of four. Fed fund futures now show a nearly 90% chance of a rate hike later this month.
- President Trump agrees to meet Kim Jung-un. In a startling announcement late Thursday, President Trump announced that he intends to do something no sitting U.S. president has ever done: meet with the leader of North Korea. The news comes after South Korean officials arrived in Washington D.C. to brief the White House on recent denuclearization talks with the North. On that point, the president indicated that “great progress [is] being made but sanctions will remain until an agreement is reached.” The timing and location of the U.S.-North Korea meeting has not been determined, but is expected to take place by May. The news helped to strengthen Asian market sentiment overnight.
- Change in Nonfarm, Private & Mfg. Payrolls (Feb)
- Unemployment Rate (Feb)
- Average Hourly Earnings (Feb)
- Average Weekly Hours (Feb)
- Labor Force Participation & Underemployment Rates (Feb)
- Wholesale Inventories (Jan)
- Wholesale Trade Sales (Jan)
- Germany: Industrial Production (Jan)
- France: Industrial Production (Jan)
- Italy: PPI (Jan)
- UK: Industrial Production (Jan)
- UK: NIESR GDP Estimate (Feb)
- China: Money Supply (Feb)