A better-than-expected jobs report did little to spur the stock market. It’s worth noting, however, that stocks remain near all-time highs.
First, the scoreboard:
- Dow: 16,452.7 (+30.8, +0.1%)
- S&P 500: 1,878.0 (+1.0, +0.0%)
- Nasdaq: 4,336.2 (-15.9, -0.3%)
And now the top stories:
- U.S. companies added 175,000 nonfarm payrolls in February, which was higher than the 149,000 expected by economists. Of those, 162,000 came from the private sector. The unemployment rate, however, climbed to 6.7% from 6.6% as the labour force participation rate remained unchanged. Here’s the bottom line from Goldman Sachs’ Jan Hatzius: “Bad weather subtracted less from nonfarm payrolls than we had anticipated, and job growth was close to our estimate of the underlying trend. The unemployment rate ticked up on stable participation, as household employment gains did not keep pace with population growth.”
- The Bureau of Labour Statistics noted that inclement weather kept 601,000 out of work.
- Perhaps the most important figure from the report was average hourly earnings, which climbed 0.4% month-over-month, or 2.2% year-over-year. This was hotter than expected, and it may reflect tightness in the labour market. Furthermore, it means inflation pressure. “Given the uncertainty there is about how much slack is left in the U.S. labour market, this should be ringing alarm bells all over the place,” said Kit Juckes, a global strategist at Société Générale.
- Citi currency strategist Steven Englander was on the same page as Juckes, noting that this puts pressure on the Federal Reserve to tighten monetary policy sooner rather than later. “You can argue that maybe the Fed has convinced investors of their commitment to low policy rates and a slow pace of policy rate increase in 2015 and beyond, but we find a lot of scepticism among investors that there is as much slack out there as the Fed has indicated,” he said. “In fact, we think that a solid [nonfarm payrolls number] either in Friday’s release or next month’s will cause investor fears of Fed tightening to [rise] back up sharply.”
- According to a new report from the Federal Reserve, U.S. consumer credit balances expanded by $US13.7 billion in January, which was a bit less than the $US14.0 billion increase expected. Nonrevolving credit (e.g., auto loans, student loans) climbed by $US13.9 billion while revolving credit (e.g., credit cards) fell by $US0.2 billion. “We expect student loans to continue to push nonrevolving credit higher while revolving credit growth remains tepid,” said Barclays’ Cooper Howes.
- Stocks remain at all-time highs five years after the start of the current bull market. On Thursday, the MSCI World Index hit an all-time high, as well.
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