Stocks got smoked, the dollar surged, and bond yields hit year-to-date highs after the latest jobs report showed the unemployment rate in February fell to the lowest in nearly seven years.
First, the scoreboard:
- Dow: 17,847.31 -288.41 (-1.59%)
- S&P 500: 2,072.42 -28.62 (-1.36%)
- Nasdaq: 4,928.96 -53.85 (-1.08%)
And now, the top stories on Friday:
- The February jobs report crushed expectations. The US economy added 295,000 jobs marking the 12th straight month of job gains above 200,000. Economists had forecast a 235,000 gain in nonfarm payrolls. The unemployment rate fell to 5.5% from 5.7%. Wage growth missed expectations, climbing 2% versus 2.2% forecast. Month-over-month, average hourly earnings rose by three cents, or 0.1%, to $US24.78.
- The sterling report brought calls that the economy has achieved full employment: the level at which economists say there to be no “deficient-demand” unemployment, meaning the unemployment rate is as low as the economy can tolerate. “The current unemployment rate (5.5%) has now breached the upper bound of the FOMC’s latest central tendency for the long-term unemployment rate (or non-accelerating inflation rate of unemployment) of 5.2-5.5%,” wrote BNP Paribas. And quipping in, Chris Rupkey at Bank of Tokyo Mitsubishi wrote: “Full employment? We are there … Wake up and smell the coffee this morning. The economy is stronger than you think.”
- The US dollar surged to its strongest level in more than 11 years following the jobs report. The Euro fell to as low as 1.0843 against the dollar, extending its decline following Thursday’s announcement of details of the ECB’s quantitative easing program. The yield on the benchmark 10-year Treasury note rallied to 2.5%, a year-to-date high.
- Following the report, commodities tanked through the trading day. Gold, silver, platinum and copper all traded lower into the market close. Gold fell by around 2.5% to as low as $US1162.90 an ounce.
- West Texas Intermediate Crude oil fell around 2% to as low as $US48.88, as the latest data from Baker Hughes showed that US oil rigs fell last week by 64 to 922, the lowest level since April 2011. Combined oil and gas rigs fell by 75 to 1,192, the lowest since the week ending December 31, 2009.
- Apple will replace AT&T on the Dow Jones Industrial Average effective March 19. Apple split its stock 7:1 last June, slashing its stock price to about $US100 from about $US700. When that was announced, there were reports that the split was an opportunity for the stock to be listed on the index, because the older, more expensive share price was a deterrent. The world’s most valuable company with a market cap of around $US730 billion has “sustained growth,” an “excellent reputation,” and strong investor demand — three of the criteria set by Dow Jones.
- The US trade deficit fell 8.3% to $US41.8 billion in January. Exports fell $US5.6 billion to $US189.4 billion, and imports fell $US9.4 billion to $US231.1 billion. Economists had forecast that the labour dispute at West Coast ports, which disrupted shipping, would shrink the trade deficit.
- The US is running out of space to cache crude oil, and soon, investors will be able to trade storage space as a commodity. On March 29, the CME Group will launch the first oil storage futures contract. Storage costs are surging and the oil market is currently in super contango: a situation where the futures contract price is higher than the expected spot price.
- Happy birthday, bull market! On March 6, 2009, the S&P 500 hit an intraday low of 666.79. On Friday, the bull run’s sixth birthday, the S&P 500 opened at 2,100.99 — an impressive 215% gain. “Only three [bull markets] since World War II have lasted this long,” S&P Capital IQ’s Sam Stovall said.