After The Close
Stocks closed the week on a firm note following a generally favorable monthly employment report. The Labor Department this morning reported that nonfarm payrolls rose by 196,000 in March. That was above expectations and well ahead of February’s weak revised showing of 33,000. Other figures in the report indicated that the nation’s unemployment rate remained low, at 3.8%, and wage growth over the past 12 months was decent, at 3.2%.
There had been concerns about the strength of the economy in recent weeks, partly given last month’s weak jobs report. But today’s good payrolls number added to the feeling that no lingering soft stretch in economic conditions is developing.
The bond market largely shrugged off the jobs data, and in fact the yield on the10-year Treasury note fell slightly, to around 2.50%. Higher yields on Treasury bonds and notes tend to indicate stronger economic expansion. Still, the yield on the 10-year T-note has risen this week after dipping below 2.40% last week on global growth concerns.
As for the major stock indexes, the Dow Jones Industrial Average climbed 40 points; the NASDAQ gained 47 points; and the S&P 500 tacked on 13 points. Market breadth was bullish, with advancing issues well ahead of decliners on both the New York Stock Exchange and the NASDAQ.
The morning’s jobs numbers meantime gave investors a sense of relief after the stock market had already put in good gains on the week. In fact, the major averages are not that far from their all-time highs.
But there was no big rally today, perhaps partly on the assumption that a steady labor market means the Federal Reserve won’t be inclined to reduce interest rates any time soon.
Then, too, a long-anticipated trade deal with China is proving slow to develop. Signs that the White House seemed noncommittal about a deal materializing did not add to the bulls’ case.
Rising oil prices are another hurdle, as a barrel of the domestic benchmark grade rose by about $1.00 a barrel today, to just above $63.00. The increase in the cost of oil is translating to higher pump prices. The national average for a gallon of gasoline is up about $0.48 this year, to $2.73. A continuation of the trend toward higher fuel prices could take a toll on retail sales.
On balance, though, the market put in a solid showing today.
- Robert Mitkowski
At the time of this writing, the author did not have positions in any of the companies mentioned.
Before The Bell
However, after the first hour, or so, the advance faltered briefly, with the S&P 500 losing its gains and the NASDAQ going negative for a time. The big issue for the market continued to be a hopefully pending trade agreement with China. Expectations are that the two nations will hammer out a deal in the coming weeks following likely high level meetings with key officials. Of course, until an actual accord is reached there will be doubts. For the most part, though, the expectation is that negotiations will be fruitful. And that is a big part of the upward trend in equity prices so far this year.
The other part of the upward move in stock prices this year--and the S&P 500 was ahead almost 15% as the latest session started--has been the evolving position at the Federal Reserve. Until the year began, the central bank, influenced by a stronger economy, was raising interest rates in lock-step fashion. More recently, however, indications that the business expansion is slowing--and data on retail sales, non-manufacturing activity, and durable goods orders all confirm this deceleration--are causing the lead bank to adjust its thinking. Now, in fact, the outlook is for stable rates this year, with a possible downtick later on in 2019.
In other concerns, the Street was anxiously awaiting the just-released data on non-farm payrolls for March. That report, which showed a strong increase of 196,000 jobs last month, had been expected to show a gain of 170,000 new positions (see below for a fuller description and analysis). Meantime, the split decision continued into the afternoon, with the Dow generally maintaining a triple-digit advance, while the NASDAQ continued to trend somewhat lower. Weakness in Tesla was a big factor in the latter's pullback. The S&P 500 was taking the middle, moving little in the aggregate.
Then, as the afternoon moved further along, the bulls stiffened their resolve, with the Dow moving up past 150 points as we neared the start of the final hour of trading. The NASDAQ also shed much of its loss, which as one point had approached some 50 points. The market would then meander somewhat into the close, as investors apparently did not want to put too big a wager on things ahead of the employment and unemployment reports. In all, the Dow would end matters ahead by 167 points, while the NASDAQ, soft all, edged down by fewer than four points. The S&P 500 was ahead by six points.
Looking out on this new and consequential day for economic news, we see that the major indexes were mixed to higher in Asia in the overnight hours, while in Europe so far this morning, the key bourses are tracking somewhat higher. Meantime, yields on the 10-year Treasury note, which eased a tad to 2.51% yesterday, are now at 2.54% on those stronger jobs figures. As for the economy, the Labor Department, as noted, just reported that the nation had added 196,000 jobs in March. Forecasts, as indicated, had called for the creation of 170,000 positions. Both numbers easily outdid the prior month's upwardly revised 33,000 tally.
In other aspects of the report, Labor indicated that the unemployment rate held steady at 3.8%; the labor force participation rate was just nominally better at 63.0%; and average hourly wages rose by four cents, to $27.70. The U.S. equity market futures, up grudgingly, to begin the pre-market hours, strengthened nicely on the better-than-forecast jobs data, suggesting a nicely higher opening when trading resumes shortly.
