Yields decline on surprise payrolls miss. Treasury yields dropped ~6 bps in the immediate aftermath of the February jobs report, where nonfarm payrolls surprisingly fell and the unemployment rate ticked up. The move momentarily reversed on inflationary fears from the Iran War’s impact on oil prices, though yields ultimately trended lower for the remainder of the session. The 2-year yield closed 2 bps lower at 3.56% (up 19 bps on the week), while the 10-year yield closed nearly flat at 4.14% (up 20 bps on the week). Meanwhile, equities sold off further on the weak jobs report and oil-driven inflation concerns, with the S&P 500 and NASDAQ closing 1.33% and 1.59% lower, respectively. Oil prices continued to soar, with WTI up nearly 13% at $90.90 per barrel.
February jobs report counters recent signs of labor market stability. Nonfarm payrolls fell 92k in February versus expectations of a 55k advance, largely reversing optimism fueled by January’s strong 126k jobs added (revised). January NFP was originally reported as 130k jobs added, while December’s print was revised lower by -65k. Some shrinkage was anticipated from healthcare worker strikes and bad weather impacting construction, though February also saw declines in leisure and hospitality, transportation and warehousing, and information industries. The unemployment rate also climbed to 4.4%, from expectations of 4.3%, which would have been the same as in January. Following the report, San Francisco Fed President Mary Daly said, “the hopes that the labor market was steadying, maybe that was too much, and we really have to keep our eye on the labor market.”
Retail sales fell in January, restrained by winter weather. January retail sales declined 0.2% from the prior month, less than the expected 0.3% drop but below December’s flat reading. Seven of thirteen categories contracted, led by the auto industry, though purchases at apparel retailers, gas stations, and personal care stores declined as well. Motor vehicle sales fell 0.9% MoM, while retail sales excluding gas and auto increased 0.3%, above estimates of a 0.2% MoM rise. Purchases at restaurants and bars, the sole service category in the retail sales report, decreased 0.2% in January. Chain restaurants, including Chipotle, reported that intense winter weather likely hindered sales, a pattern experts believe disrupted most industries.
