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%.
Chief Economic Strategist Managing Director
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