Today's market might have participants on the proverbial couch, talking things out as they try to get their mind around a new trade proposal and the latest employment report.
Briefly, President Trump ordered the Office of the U.S. Trade Representative to consider whether it would be appropriate to impose an additional $100 billion of tariffs on Chinese imports, and, if so, to identify the products upon which to impose such tariffs.
The stock market did not like that news. The S&P futures traded down as many as 41 points overnight when the news hit, but they worked their way back and were down 20 points shortly ahead of the release of the March employment report.
The rebound effort in the futures market was driven by a similar mentality from Wednesday when knee-jerk reactions were assuaged by the understanding that the tough-sounding action is still just a proposal. Even so, China was quick to say that it would respond as appropriate to protect its interests.
The continued jawboning on trade matters remains a headwind for the market since it breeds uncertainty and second-guessing about the ability of companies to live up to this year's high earnings expectations.
The March employment report, meanwhile, was a mixed bag. It showed a surprisingly weak 103,000 gain in nonfarm payrolls and a sturdy 0.3% increase in average hourly earnings.
The latter left average hourly earnings up 2.7% year-over-year, which is a tick higher from February but still not as high as the 2.8% year-over-year growth rate seen in January. Mindful of that, the key takeaway from the report is that it was neither too hot nor too cold to provide a clear basis for the Federal Reserve to re-think its outlook for monetary policy.
The notable headlines from the Employment Situation Report are as follows:
- March nonfarm payrolls increased by 103,000 (Briefing.com consensus 175,000). Over the past three months, job gains have averaged 202,000 per month
- February nonfarm payrolls revised to 326,000 from 313,000
- January nonfarm payrolls revised to 320,000 from 239,000
- March private sector payrolls increased by 102,000 (Briefing.com consensus 180,000)
- February private sector payrolls revised to 320,000 from 287,000
- January private sector payrolls revised to 188,000 from 238,000
- March unemployment rate was 4.1% (Briefing.com consensus 4.0%) versus 4.1% in February
- Persons unemployed for 27 weeks or more accounted for 20.3% of the unemployed versus 20.7% in February
- The U6 unemployment rate, which accounts for unemployed and underemployed workers, was 8.0, versus 8.2% in February
- March average hourly earnings were up 0.3% (Briefing.com consensus 0.2%), after increasing 0.1% in February
- Over the last 12 months, average hourly earnings have risen 2.7%, versus 2.6% for the 12 months ending in February
- The average workweek in March was 34.5 hours (Briefing.com consensus 34.5) versus 34.5 hours in February
- March manufacturing workweek was down 0.1 hours to 40.9 versus 41.0 hours in February
- Factory overtime decreased 0.1 hours to 3.6 hours
- The labor force participation rate was 62.9% in March, versus 63.0% in February
The S&P futures are currently down 20 points and are trading 0.7% below fair value. That leaves the S&P 500 on track for a lower start to the day. The Nasdaq 100 futures are down 56 points and the Dow Jones Industrial Average futures are down 204 points, so they will also head south at the sound of the opening bell.
Where things go after that is anyone's best guess in a market that has been increasingly volatile and psycho-analyzed to the nth degree.
A seat on the couch, then, may just be the best place right now for a lot of market participants.