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Briefing.com Summary:
*The January Employment Situation report produced a host of positive surprises.
*The Treasury market is sensing the possibility that the Fed won't be cutting rates in the near future.
*Stocks are poised to advance when the opening bell rings, supported by a pro-cyclical trade.
There was a break in the rebound action yesterday, but not for the Dow Jones Industrial Average, which extended its reach into record territory. AI disruption worries factored into Tuesday's trading, undercutting many of the financial advisory and wealth management stocks, while a weak retail sales report for December created some economic concerns that pushed market rates lower.
There isn't any additional breakage today at the index level. Equity futures were trading higher ahead of the delayed January Employment Situation report, and they shot higher after its release. Why? Because the report itself was much better than expected, notwithstanding an annual benchmark revision that showed the total nonfarm employment level for March 2025, on a not seasonally adjusted basis, was revised downward by 862,000.
For the month of January, the indicators—payrolls, unemployment rate, average hourly earnings, and average workweek—all contained positive surprises.
The key takeaway from the report is that it is a positive sign for the U.S. growth outlook, yet it may come with the cost of foregoing an additional rate cut by the Fed, at least in the near future.
The Treasury market is clueing in on that possibility. The 2-yr note yield, at 3.45% just before the release, is up eight basis points to 3.53%, and the 10-yr note yield, at 4.12% just before the release, is up four basis points to 4.19%.
Currently, though, the S&P 500 futures are up 45 points and are trading 0.7% above fair value, the Nasdaq 100 futures are up 224 points and are trading 0.9% above fair value, and the Dow Jones Industrial Average futures are up 260 points and are trading 0.5% above fair value. This is a disposition that should show some favoritism for the pro-cyclical trade when the opening bell rings.
Notable headlines from the January Employment Situation Report:
- January nonfarm payrolls increased by 130,000 (Briefing.com consensus: 68,000). The 3-month average for total nonfarm payrolls increased to 73,000 from -17,000. December nonfarm payrolls revised to 48,000 from 50,000. November nonfarm payrolls revised to 41,000 from 56,000.
- January private sector payrolls increased by 172,000 (Briefing.com consensus: 60,000). December private sector payrolls revised to 64,000 from 37,000. November private sector payrolls revised to 72,000 from 50,000.
- January unemployment rate was 4.3% (Briefing.com consensus: 4.4%) versus 4.4% in December. Persons unemployed for 27 weeks or more accounted for 25.0% of the unemployed versus 26.0% in December. The U6 unemployment rate, which accounts for unemployed and underemployed workers, decreased to 8.0% from 8.4% in December.
- January average hourly earnings were up 0.4% (Briefing.com consensus: 0.3%) versus a downwardly revised 0.1% increase (from 0.3%) in December. Over the last 12 months, average hourly earnings have risen 3.7%, unchanged from the 12 months ending in December.
- The average workweek in January was 34.3 hours (Briefing.com consensus: 34.2) versus 34.2 hours in December. The manufacturing workweek increased 0.1 hour to 40.0 hours. Factory overtime was unchanged at 2.9 hours.
- The labor force participation rate increased to 62.5% from 62.4% in December.
- The employment-population ratio increased to 59.8% from 59.7% in December.
