Strong Jobs Report Sees Conflicted Markets Stretched This Way And That

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March was another strong month for the U.S. labor market, as jobs and wage growth increased more than expected.

There were 215,000 new nonfarm payrolls, according to Bureau of Labor Statistics data released Friday. February’s job growth data was revised upward by 3,000 people to 245,000.

Retail, construction, and healthcare led the song sectors, but manufacturing jobs fell by 29,000 to the lowest level in the current, post-recession economic cycle.

Manufacturing suffered because of cheap energy prices, making shipping from Asia and Mexico once again cheaper.

Average hourly earnings rose 0.3% from February and 2.3% compared to the same period last year, beating forecasts easily. This rise in wages is right in line with the Fed’s concept of inflation but not above it. 

There was an abundance of job opportunities and that is drawing more and more people back into the “actively looking” column, which means the labor participation rate is rising. 

This means a number of things that are key to markets we are following today. 

The balance between the growth in the number of workers and the number of new seekers allowed the unemployment rate to actually go up. (To 5.0%) That means “full employment,” from the Federal Reserve point of view is pushed back for at least another month.

We can take it as a signal that the Fed will keep interest rates low in order to bring more and more displaced and perhaps disenchanted workers back into the fold.

Equities traders love that scenario because we get growth along with low interest rates, which allows the speculation band to keep playing on and on, and maybe just a little more loudly. It’s a scenario where lots of money can be made if all the stars align.

The Dow closed up over 100 points, near a four-year high, while the S&P 500 (regular index) closed at 2072, eyeing 2100. The NASDAQ rose almost 1.00% on solid biotech performance and news.

U.S. stock were up despite a 4.3% plunge in West Texas Intermediate oil brought on by comments out of Saudi Arabia that indicated a production freeze was not forthcoming. However, we think that could be a temporal situation. You can bet that there will be more palavering from all quarters on the matter by next week’s end.

We feel that gold traders are mistaken in their fear of a Federal Reserve rate hike. That fear unfortunately drove gold down over $10 per ounce.

Gold was also an outlier on the day in the world of haven hunting. Elsewhere, demand for safety seemed strong.

The U.S. 10-year yield was down again marginally, indicating that there are plenty of buyers out there for the government paper. That is shorthand for “haven demand.” Higher rates mean the bonds have to work to attract buyers.

Another haven play was in full swing today. The yen/U.S. dollar pair saw the yen once more take the upper hand. The Swiss franc, the other chief haven currency, also was stronger. The euro was modestly stronger at the close.

Wishing you as always, good trading,

Gary S. Wagner - Executive Producer