Jobs Report Crushes Forecasts, Sending Rates and Stocks Higher

 

Blockbuster jobs report shatters expectations as unemployment rate dips to 50-year low. The jobs report beat expectations by adding 266,000 jobs in the month of November (estimates had called for an increase of 180,000)- bringing the three month average up to 205,000 (a 10-month high). The unemployment rate fell to a 50-year low of 3.5%. The report confirms the Fed’s view that the US economy remains on solid footing, and that their policy remains appropriate ahead of next week’s FOMC meeting. Fed Fund futures imply a mere 3.0% likelihood of a rate hike at the 12/11 meeting, the 10-year Treasury yield climbing 4 basis points to 1.85% as a result of the strong report.

 

 

Stock market continues to climb wall of worry. US equities rose yesterday and are higher again today after a blockbuster jobs report. What is there to worry about? For one, the “phase one” trade deal markets have been focused on seems far from certain with 10 days remaining before the US’s latest set of tariffs kicks in. A trade war with Europe could also be brewing, President Trump’s contentious NATO conference appearances suggesting the EU may be next in his crosshairs. Tensions between the US and North Korea could also be escalating again, North Korea warning the US overnight that the use of the insult “rocket man” to describe Kim Jung Un would result in “horrible consequences.” In spite of all this, stocks have continued to bounce back after the rough start to the week- the S&P 500 rising 0.15% yesterday and futures pointing to another positive session today.

 

 

Day ahead. With the jobs report out of the way, attention will turn to inventories data released at 10:00 AM. The University of Michigan consumer sentiment survey is also released at 10:00 AM and will be closely watched as markets look for any sign of weakness that could negatively impact consumer spending.