Dow recovered 203, advancers only modestly ahead of decliners & NAZ gained 156. The MLP index was off 1+ to the 287s & the REIT index edged higher to the 373s. Junk bond funds crawled higher & Treasuries saw heavy selling bringing higher yields (more below). Oil edged up into the 87s & gold jumped another 33 to a new record at 2341.
AMJ (Alerian MLP Index tracking fund)
Job creation in Mar easily topped expectations in a sign of continued acceleration for what has been a bustling & resilient labor market. Nonfarm payrolls increased 303K for the month, well above the estimate for a rise of 200K & higher than the downwardly revised 270K gain in Feb, the Labor Dept's Bureau of Labor Statistics reported. The unemployment rate edged lower to 3.8%, as expected, even though the labor force participation rate moved higher to 62.7%, a gain of 0.2 percentage point from Feb. A broader measure that includes discouraged workers & those holding part-time positions for economic reasons held steady at 7.3%. In the key average hourly earnings measure, wages rose 0.3% for the month & 4.1% from a year ago, both in line with estimates. Growth came from many of the usual sectors that have powered gains in recent months. Health care led with 72K, followed by gov (71K), leisure & hospitality (49K), & construction (39K). Retail trade contributed 18K while the “other services” category added 16K. The Feb revision was just 5K lower while the Jan revision brought that total up by 27K to 256K, still well below the initial estimate of 353K. A string of positive gains has kept unemployment below 4% since Jan 2022, though there have been some signs of cracks. For instance the level of household employment had grown only modestly over the past year, while temporary employment has declined sharply. However, the household survey, which is used to calculate the unemployment rate, posted an even more robust gain in Mar, up 498K, more than absorbing the 469K increase in the civilian labor force level.
Job growth zoomed in Mar as payrolls jumped by 303K and unemployment dropped to 3.8%
Treasury yields climbed on after closely watched nonfarm payrolls data for Mar surged past expectations. The 10-year Treasury yield jumped 5 basis points to 4.361% after briefly touching a new 2024 high of 4.429% on Wed. The 2-year Treasury yield was also higher by 6 basis points at 4.702%. Yields & prices move in opposite directions & 1 basis point equals 0.01%. The jobs figures plays into market expectations of when the Federal Reserve will start to cut interest rates. With the labor market strong, the central bank can continue beating back inflation & wait longer to ease monetary policy. At its last meeting, the central bank indicated that it still expects 3 rate cuts by the end of this year. But Minneapolis Fed Pres Neel Kashkari yesterday became the latest high-profile figure to question whether there will be any rate cuts if inflation remains above the Fed's 2% target. “If we continue to see inflation moving sideways, then that would make me question whether we need to do those rate cuts at all,” Kashkari said, adding that the economy has been “very resilient.” Interest rate futures show that traders don't expect the Fed to adjust rates at its next meeting on May 1, according to the CME Fed WatchTool, & see a 43% chance that rates will also stay unchanged at the Jun gathering — up from less than 28% a month ago.
10-year Treasury yield jumps after stronger-than-expected jobs report
Mortgage rates increased slightly this week as demand continues to wane amid the ongoing housing affordability crisis. Freddie Mac's latest Primary Mortgage Market Survey showed that the average rate on the benchmark 30-year fixed mortgage rose to 6.82% this week from 6.79% last week. The average rate on a 30-year loan was 6.28% a year ago. At the same time, the average rate on the 15-year fixed mortgage ticked down to 6.06% after coming in last week at 6.11%. One year ago, the rate on the 15-year fixed note averaged 5.64%. "Since the start of 2024, the 30-year fixed-rate mortgage has not reached seven percent but has not dropped below 6.6 percent either," said Sam Khater, Freddie Mac's chief economist. "While incoming economic signals indicate lower rates of inflation, we do not expect rates will decrease meaningfully in the near-term," Khater added. "On the plus side, inventory is improving somewhat, which should help temper home price growth." The combination of persistently elevated rates & record-high home prices has left the housing market stalled for months. The Mortgage Bankers Association reported Wed that purchase applications have fallen for 3 consecutive weeks, putting a damper on the typically busy spring season.
Mortgage applications plummet as rates continue to rise improsi
While the popular stock averages jumped on the jobs report, it's not so rosy. The advance-decline rate is not impressive, gold surged (negative bets on stocks) & high yields moved even higher as investors were buying more Treasuries. The markets continue to be unsettled.
Dow Jones Industrials
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