There is no summit date (yet) for the signing of a trade deal between the U.S. and China, but both sides have been sounding wishful about a deal getting done. Neither side, however, has made it abundantly clear (yet) that the biggest issues, like forced technology transfers and enforcement oversight, will be resolved.
President Trump said the world should know, probably in the next four weeks or so, if this trade deal is going to get made. President Xi, meanwhile, has reportedly called for a conclusion of the negotiations as soon as possible.
The market continues to place its faith in a deal getting done. That has been evident in its performance year-to-date, and it was evident in the futures market this morning in front of the employment report.
To wit, the futures for the major indices were all sporting small gains. That might not sound like much, but remember how far this market has come, and remember, too, that if the opposite conclusion was being drawn, the futures for the major indices would be sharply lower.
The latter isn't the case -- and it is now further from the case following the release of the employment report for March. Currently, the S&P 500 futures are up eight points, the Nasdaq 100 futures are up 32 points, and the Dow Jones Industrial Average futures are up 95 points, which leaves them all 0.3-0.4% above fair value.
The key takeaway from the report is that it had that Goldilocks hue again of solid job growth and no inflation worries. Nonfarm payrolls increased by 196,000 and average hourly earnings increased 0.1%, leaving them up 3.2% yr/yr versus 3.4% yr/yr in February.
In brief, this report accomplished three important things: (1) the yr/yr moderation in wage growth will keep the Fed sidelined (2) it exposed February's weak payrolls data to be an aberration and (3) it helped quiet recession concerns.
Other notable headlines from the Employment Situation Report are as follows:
- March nonfarm payrolls increased by 196,000 (Briefing.com consensus 170,000). Over the past three months, job gains have averaged 180,000 per month
- February nonfarm payrolls revised to 33,000 from 20,000
- January nonfarm payrolls revised to 312,000 from 311,000
- March private sector payrolls increased by 182,000 (Briefing.com consensus 160,000)
- February private sector payrolls revised to 28,000 from 25,000
- January private sector payrolls revised to 297,000 from 308,000
- March unemployment rate was 3.8% (Briefing.com consensus 3.8%), unchanged from 3.8% in February
- Persons unemployed for 27 weeks or more accounted for 21.1% of the unemployed versus 20.4% in February
- The U6 unemployment rate, which accounts for unemployed and underemployed workers, was unchanged at 7.3%
- March average hourly earnings were up 0.1% (Briefing.com consensus +0.2%), after increasing 0.4% in February
- Over the last 12 months, average hourly earnings have risen 3.2%, versus 3.4% for the 12 months ending in February
- The average workweek in March was 34.5 hours (Briefing.com consensus 34.5), versus 34.4 hours in February
- Manufacturing workweek was unchanged at 40.7 hours
- Factory overtime decreased by 0.1 hour to 3.4 hours
- The labor force participation rate was 63.0% in March versus 63.2% in February
The Treasury market saw some knee-jerk trading action following the release of the employment report, rallying at first before giving way to renewed selling interest. Losses today aren't extensive, yet the creep up in yields, and some curve steepening, is consistent with the notion that recession worries are less than they were just a few weeks ago.
The 10-yr yield is up one basis point to 2.52% while the 3-month bill yield is unchanged at 2.43%.