NFP bounces back to hit sweet spot for Equities

Summary:

  • NFP employment change: +196k vs +177k exp

  • Average hourly earnings Y/Y: +3.2% vs +3.4% exp

  • S&P500 surges to 2019 peak after the data

 

The much anticipated US employment report has lived up to its billing with an impressive bounce back in the number of jobs added after a big disappointment last time out, while at the same time an unexpected drop in wages provides something of a sweet spot for US stocks with the S&P500 rallying to its highest level of the year. An increase of 196k jobs for March was above the +177k expected and after February’s number hit a 17 month low of +33k (revised up from +20k initially) it appears that the prior release was an anomaly rather than a warning sign.

NFP bounced back in the month of March with the service sector providing the bulk of the jobs added. Source: XTB Macrobond

 

More good news came for stock market bulls in the form of wage growth with average earnings Y/Y coming in below the forecast +3.4% at +3.2%. In M/M terms the reading was +0.1% vs +0.3% exp while the unemployment rate held steady at 3.8%. This is good news for equities as it gives the Federal Reserve more leeway with their monetary policy going forward and quite remarkably the markets are now pricing in a 75% chance of a cut in interest rates this year!   

Wages in the US pulled back from their highest level in several years and this will help to reduce any pressure on the Fed to continue tightening policy and in fact the central bank are now given a 3 in 4 chance of cutting rates this year. Source: XTB Macrobond


Ahead of the opening bell there’s been further gains for US indices with the S&P500 taking out recent highs to trade at its new 2019 peak. The market is now only 2% from it’s all-time high set back last October and with this pleasing jobs report and the promising noises coming out of US-China trade talks there’s every chance the market completes an incredible recovery in the not too distant future.   

US stocks have now rallied around 25% from the low seen at the back end of last year, with the latest employment report providing further reason for bulls to cheer. Source: xStation  

 

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Morning wrap (27.11.2020)
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