The unexpected pickups in hiring and wages last month increase chances the Federal Reserve will hold interest rates high for longer and potentially keep the door open to an 11th consecutive hike in June.
April’s non-farm payrolls rose 253,000 versus the consensus estimate of an increase of 185,000. The unemployment rate fell back to 3.4% versus the expected rate of 3.6%. Wages rose more than anticipated and at the fastest rate in a year and the labor participation rate was unchanged.
Treasuries sold off on the data. Swap contracts linked to Fed meetings, which on Thursday briefly fully priced in a cut in July, moved higher to levels consistent with a stable policy rate until at least September.
As commented last week, market sentiment indicators are exactly that…sentiment indicators that can change radically in a moment.
Equites on the other hand advanced as Apple exceeded expectations and from a gargantuan rally in several regional bankshares that have been crushed. Bloomberg reported the short interest is “huge” in regional banks, suggesting an outsized short covering rally could occur. Could it be suggested such occurred on Friday?
The economic calendar is comprised of several top inflation indices such as the CPI and PPI, import and export prices as well as a sentiment indicator.
Last night the foreign markets were up. London was up 0.98%, Paris up 0.23% and Frankfurt up 0.15%. China was up 1.81%, Japan down 0.71% and Hang Seng up 1.24%.
The Dow should open flat. The 10-year is off 7/32 to yield 3.47%.
Kent Engelke
Chief Economic Strategist Managing Director
The views expressed herein are those of Kent Engelke and do not necessarily reflect those of Capitol Securities Management. Any opinions expressed are statements of judgment on this date and are subject to certain risks and uncertainties which could cause actual results to differ materially from those currently anticipated or projected. Any future dividends, interest, yields and event dates listed may be subject to change. An investor cannot invest in an index, and its returns are not indicative of the performance of any specific investment. Past performance is not indicative of future results. This material is being provided for informational purposes only. Any information should not be deemed a recommendation to buy, hold or sell any security. Certain information has been obtained from third-party sources we consider reliable, but we do not guarantee that such information is accurate or complete. This report is not a complete description of the securities, markets, or developments referred to in this material and does not include all available data necessary for making an investment decision. Prior to making an investment decision, please consult with your financial advisor about your individual situation. Investing involves risk and you may incur a profit or loss regardless of strategy selected. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct. If you would like to unsubscribe from this e-mail distribution, please reply to this e-mail and indicate that you wish to unsubscribe in your response.
