Job growth surges, but markets looking ahead. The economy added 273,000 jobs in February, handily topping all estimates, while December 2019 and January 2020 were revised upward an additional 85,000. With revisions, this is the first time the economy has added more than 250,000 jobs over consecutive months since 2016. The jobs report extended a run of upside surprises for the U.S. economy, pointing to a solid economic base before the impact of the coronavirus starts to make itself felt, but markets continue to be focused on the uncertainty that lies ahead.
More red. US futures opened significantly lower this morning as concerns over the potential slowdown due to COVID-19 continue to rock global markets. The big news this morning is the total collapse of yields, with the 10-year Treasury yield making another new low, sinking beneath 0.7% earlier this morning. Various other yields across the curve are also making new all-time lows.
How volatile is this? The S&P 500 Index fell 3% yet again yesterday, making it four days this week that stocks closed either up or down 2.5% for the first time since the US debt downgrade in August 2011. It hasn’t made five days in a row since December 2008. Additionally, the CBOE Volatility Index (VIX) has closed above 30 for 14 consecutive days, again something that hasn’t happened since August 2011.
Retest remains a possibility. While equities are tracking toward a gain for the week, Thursday’s action likely reminded investors that stocks are not yet out of the woods. Carving out a market bottom can be a process, and clients should be reminded that retests of the correction lows are more common occurrences than V-shaped recoveries like we saw in December 2018. Last Friday’s low of 2855 was 5.5% below this Thursday’s close, and we continue to see technical support from the August lows at 2822 just below that.
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