EmailThursday's session was nearly a carbon copy of Wednesday's session. Cyclical sectors led modest gains for the broader market; the Dow Jones Transportation Average underperformed; and bonds were weak. One difference was that the Nasdaq (+0.3%) led the big three averages on Thursday after trailing them on Wednesday.
Little changed overnight in terms of sentiment. Most Asian markets traded higher, led by the Nikkei Average in Japan, which soared 2.6% on the back of a weak yen and a revised Q4 GDP reading showing no growth quarter-over-quarter versus a prior 0.1% contraction.
For the most part, it was another carbon copy trade in Japan, too. See yen weaken, see stocks rally.
Another focal point was China's trade balance report for February. It showed exports increasing 22% in February and imports declining 15%. The latter figure weighed on the mainland market as the Shanghai Composite dipped 0.2%.
The export number, however, was viewed as an encouraging demand signal that translated well in European markets, all of which registered modest gains ahead of the US employment report, which is the real focal point today.
In brief, it was a good report.
Nonfarm payrolls increased by 236,000 in February (Briefing.com consensus 165,000) following a downwardly revised 119,000 increase (from 157,000) in January. Private sector payrolls jumped by 246,000 (Briefing.com consensus 178,000) from 140,000 in January.
The unemployment rate dipped to 7.7% from 7.9%. That improvement was owed in part to a decline in the participation rate from 63.6% to 63.5%, which is not such a great thing, and a pickup in the number of employed workers, which is a good thing.
Hourly earnings increased 0.2% as expected, up from a 0.1% increase in January. The average workweek ticked up 0.1 to 34.5 hours (Briefing.com consensus 34.4). Another good sign was that the manufacturing workweek rose 0.2 to 40.9 hours while factory overtime increased 0.1 to 3.4 hours.
By and large, the headlines for the February employment report should provide a boost to consumer sentiment. They have certainly provided a boost to the S&P futures, which are up eight points after being up just four points ahead of the release.
The Treasury market, however, may be the better tell in terms of how this report is being viewed. The 10-year note is getting hit fairly good (-20/32 at 2.07%) as traders recognize the February employment report checks off a lot of boxes that will get Fed officials thinking more about the timing of when to start pulling back on their ultra-accommodative action.
The Fed is likely to be more patient in that respect than the market perceives.
The question is, will the fear of the Fed pulling back sooner rather than later ultimately get in the way of what has been a remarkable run for the equity market?
--Patrick J. O'Hare, Briefing.com
