Market Insights 3/6/2020

The U.S. Economy added 273,000 jobs in February versus expectations for 175,000, but the data offered markets no reprieve from the recent selloff.

The major indexes fell for the second day in a row. This week started out with an impressive rebound, with the Dow surging over 5%, but the rest of the week was skewed to the downside in very volatile trading.

Treasury yields set another round of record lows on the long end of the curve with the yield on the 10-year note falling all the way to 0.66% before rebounding higher.

Crude oil fell and gold prices were higher.

The Markets….

The Dow Jones Industrial Average lost 256 points (1.0%) to 25,865

The S&P 500 lost 52 points (1.7%) to 2,972

The NASDAQ lost 163 points (1.9%) to 8,576

In heavy volume, 1.6 billion shares were traded on the NYSE and 4.3 billion shares changed hands on the NASDAQ

WTI oil lost $4.62 to $41.28 per barrel and wholesale gasoline was down $0.13 to $1.39 per gallon

The Bloomberg gold spot price was up $4.40 to $1,672.40 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—dropped 0.8% to 96.02

For the week, the Dow was up 1.8%, the S&P rose 0.6% and the NASDAQ added 0.1%

February labor report tops forecasts, trade deficit shrinks, yields continue to tumble

Non-farm payrolls rose by 273,000 jobs month-over-month in February, compared to the Bloomberg forecast of a 175,000 increase. The rise of 225,000 seen in January was revised to a gain of 273,000 jobs. Excluding government hiring and firing, private sector payrolls increased by 228,000, versus the forecasted gain of 160,000, after rising by 222,000 in January, which was revised from the 206,000 increase that was initially reported. Notable job gains occurred in health care and social assistance, food services and drinking places, government, construction, professional and technical services, and financial activities.

The unemployment rate dipped to 3.5% from January’s 3.6% rate, where it was forecasted to remain, while average hourly earnings were up 0.3% m/m, matching projections and compared to January’s unrevised 0.2% gain. Y/Y, wage gains were 3.0% higher, in line with estimates. Finally, average weekly hours ticked higher to 34.4 from January’s 34.3, where it was expected to remain.

Treasuries continued to surge, with the yield on the 2-year note falling 8 basis points to 0.52%, the yield on the 10-year note dropping 13 bps to 0.78%, and the 30-year bond rate tumbling 23 bps to 1.31%. Bond yields extended a recent plunge to fresh record lows as the coronavirus concerns foster a decisive flight to safety. The Central Bank may cut by another 50 bps at its scheduled meeting later this month.

The trade balance showed that the January deficit narrowed more than expected, coming in at $45.3 billion versus estimates of $46.1 billion. December’s deficit was revised to a shortfall of $48.6 billion from the originally-reported $48.9 billion.

Global equities end the week sharply lower

Global equities saw a widespread drop, with the global markets continuing to tumble as uncertainty regarding the spreading of the coronavirus—with global cases surpassing 100,000—continuing to stymie economic and earnings forecasts. Bond yields around the globe continued to tumble.

The US 10-year Treasury yield set a new record low of 0.66% and was joined in a record setting by the German 10-year bond falling to -0.71%. The virus uneasiness and uncertainty overshadowed today’s upbeat U.S. employment report for February and a much stronger-than-expected rise in German factory orders for January.

The U.K. FTSE 100 Index was down 3.6%, France’s CAC-40 Index tumbled 4.1%, Germany’s DAX Index declined 3.4%, Spain’s IBEX 35 Index and Italy’s FTSE MIB Index fell 3.5%, and Switzerland’s Swiss Market Index traded 4.0% lower.

Japan’s Nikkei 225 Index dropped 2.7% and the Hong Kong Hang Seng Index fell 2.3%, while the Shanghai Composite Index traded 1.2% to the downside. Australia’s S&P/ASX 200 Index tumbled 2.8%, South Korea’s Kospi Index declined 2.2% and India’s S&P BSE Sensex 30 Index decreased 2.3%.

Next week’s international economic calendar will bring some potentially meaningful reports courtesy of: Australia—March consumer confidence. China—February trade, inflation and lending statistics. India—last month’s trade balance. Japan—Q4 GDP and Q1 business sentiment. Eurozone—European Central Bank monetary policy decision and March investor confidence, as well as German CPI for February.