Daily Market Color

Rates Rise Despite Disappointing Jobs Report

Treasury yields jump higher while equities close at all-time highs
 
This morning’s jobs report, described as “grim” by President-elect Joe Biden, displayed a much weaker than anticipated outlook for the US labor market.  The disappointing figures further stressed the need for fiscal stimulus in the near future, and with the hopes for Congress delivering such an action expeditiously, all three major indices closed at record highs – the S&P +0.9%, the DJIA +0.8%, the Nasdaq  +0.7%.  Treasury yields and swap rates rose 1-8 bps across the curve – the 10-year UST yield closed at 0.97%.
Unemployment rate drops to 6.7%, nonfarm payrolls grow by 245,000 in November
 
The pace of hiring slowed significantly from October, with payrolls reported well below the expected +500,000.  The jobs report detailed that “notable job gains occurred in transportation and warehousing, professional and business services, and health care.  Employment declined in government and retail trade.”  The unemployment rate fell by 0.2% in November (in-line with expectations), however much of the decline was attributed to the 0.2% decrease in the labor force participation.  The jobless rate is down 8% from its April high but is 3.2% above February’s level. 
Goods and services trade deficit increases to $63.1 billion in October
 
The deficit grew by $1 billion after imports increased more than exports.  According to the report, the rise “reflected an increase in the goods deficit of $0.6 billion to $81.4 billion and a decrease in the services surplus of $0.4 billion to $18.3 billion.”
US dollar has its worst week in a month
 
The dollar index is continuing to trend downward, touching a 2 ½ year low of 90.504 yesterday. With continued positive news surrounding Pfizer’s vaccine, investors are also starting to short the US dollar on the premise the Fed will continue to keep rates low for the foreseeable future.

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