Dow fell 55 (400 below the opening highs), decliners over advancers 4-3 & NAZ dropped another 260 (off more than 10% from its recent record). The MLP index was even in the 169s & the REIT index slid back 3+ to 370. Junk bond funds drifted lower & Treasuries were sold again (more below). Oil jumped 1+ to the 65s & gold fell 6 to 1693.
AMJ (Alerian MLP index tracking fund)
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The US economy added 379K jobs in Feb, evidence the labor market's recovery is gaining steam nearly one year into the pandemic as coronavirus caseloads fall nationwide & many states ease restrictions on business activity. The unemployment rate fell slightly to 6.2% — well below the Apr peak of 14.7% but about twice the pre-crisis level, the Labor Dept said in its monthly payroll report. The foercast expected the report to show that unemployment remained unchanged at 6.3% & the economy added 182K jobs. In total, the US has recovered roughly ½ of the 22M jobs lost during the first 2 months of the pandemic. There are still 9.5M more Americans out of work than there one year ago, before the crisis began. But the report — which marks the most jobs created since Oct — is a sign of renewed momentum in hiring. After a sharp contraction in Mar & Apr, the labor market quickly rebounded, adding 9.3M jobs in the span of just 3 months. In the months since then, job growth cooled dramatically, with employment falling by 306K in Dec, revised figures show. Jan gains were revised higher, to 166K from 49K. Economists attributed the better-than-expected report to more people receiving the COVID-19 vaccine, a lower level of infections & fewer restrictions on businesses.
Job growth surges above expectations as recovery picks up steam
Treasury yields climbed after the Feb jobs report showed
higher-than-expected job gains, adding to doubts whether the Federal
Reserve will able to stay as accommodative for as long as they have
signaled. The 10-year Treasury note yield rose 6.2 basis points to 1.612%, a Feb high, while the 2-year note rate was up 0.6 basis point to 0.151%. The 30-year bond yield rose 3 basis points to 2.33%.
10-year Treasury yield shoots above 1.60% after jobs report
Federal debt is poised to double to 202% of GDP over the next 30
years, according to the Congressional Budget Office (CBO), heightening the
risk of a financial crisis in the US.
The nonpartisan office projected that federal debt will be 102% of GDP by the end of this year & will
nearly double that by 2051. Such high debt levels could increase
borrowing costs, slow economic output & increase the danger of a
financial crisis, the CBO added. The outlook does not take into account the additional spending that Congress is expected to approve this year, including Pres Biden's $1.9T coronavirus relief package that Dems hope to enact in the
coming weeks, as well as an expensive infrastructure bill. Rep
lawmakers unanimously oppose the latest stimulus measure, criticizing
the size & scope of the legislation & pointing to the nation's
ballooning deficit — which hit $3.1T in fiscal year 2020 — as a
reason to avoid extraneous spending when they say the economy is already
poised for a strong recovery from the pandemic. “The
risk of a fiscal crisis appears to be low in the short run despite the
higher deficits and debt stemming from the pandemic,” the CBO said. “Nonetheless, the much higher debt over time would raise the risk of a
fiscal crisis in the years ahead.” The
federal budget deficit, the gap between what the US spends & what
it collects in taxes & other revenue, is expected to reach 10.3% of
GDP this year, the 2nd-highest level since 1945. The budget deficit
could balloon to 13.3% of GDP in 2051 after dropping slightly in 2031 as
the economy rebounds from the pandemic-induced recession. Driving the deficit surge is the increasing cost of
serving the debt: Net spending on interest will triple relative to GDP
in the 2 decades leading up to 202%. Spending on programs like Social
Security & Medicare is also expected to rise. "High debt
levels will slow income and wage growth, increase interest payments,
place upward pressure on interest rates, reduce the fiscal space
available to respond to a recession or other emergency, place an undue
burden on future generations, and heighten the risk of a fiscal crisis,"
the Committee for a Responsible Federal Budget, a non-partisan group,
said in a statement. They
added: "While policymakers are rightly focused on responding to the
current crisis, they cannot and should not continue to ignore our
long-term fiscal situation."
US debt on track to double by 2051, raising risk of financial crisis, CBO says
The gut reaction to the jobs data brought out buyer at the opening. After thinking about what the announcement meant, they went home. More attention will be be given to the reasoning for passing another whopper stimulus budget, mostly filled with unnecessary pork. Going forward, rising interest rates will affect investors' thinking. Expect stocks to be sold later today.
Dow Jones Industrials
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