January’s jobs report was stronger than expected. Payrolls rose the most in more than a year and the unemployment rate unexpectedly fell even with an increase in the Labor Participation Rate (LPR).
The report suggests that the labor market is find its footing after a year of nominally rising unemployment and minimal hiring. Has the labor market moved from a no firing/no hiring environment to something more robust? One month does not make a trend but the strength across the data is encouraging, specifically in the rising LPR and average hourly earnings and hours worked.
The data shifted monetary policy expectations as it is now believed the next rate cut may now be in July versus June. Two reductions are still expected for 2026.
Treasuries slumped led by shorter maturities causing the yield curve to nominally flatten as the market was expecting a weak number and got the opposite.
Yesterday was a $42 billion 10-year Treasury auction. Many believed the auction would be a non-event given the recent increase in yields. Demand however fell short of expectations with the longer end of the Treasury market continuing to sell off.
Today is a $25 billion auction of the 30-year Treasury. How will it be received?
Friday is the release of January’s CPI. What will it suggest?
Equites were quietly volatile yesterday retracing about a 0.5% gain to close essentially unchanged.
Last night the foreign markets were mixed. London was up0.09%, Paris up 0.86% and Frankfurt up 1.35%. China was up 0.05%, Japan down 0.02% and Hang Seng down 0.86%.
Futures are relatively flat. The 10-year is up 3/32 to yield 4.16%.
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.
