Robust June Payrolls Report Fuels Bullish Sentiment

US stocks rallied to close the week while Treasury yields are down marginally as investors reacted to today’s robust jobs report.  Payrolls surged in June with US employers adding 287,000 jobs last month after a dismal May report that raised concerns about the health of the economy.  The June report showed the best US job growth in eight months, and beat market expectations for the first time since March.  The data suggests that the disappointing May payrolls report was merely a blip and not indicative of a new trend.  The unemployment rate rose to 4.9% as more people entered the labor force, and the underemployment rate dropped to the lowest level since April 2008.  On an industry basis, gains were broad-based, with even the troubled manufacturing sector contributing 14,000 new jobs.  The headline number received a boost of 35,000 jobs due to the return of striking Verizon workers which weighed on the May report.  While labor market slack is showing signs of diminishing, wage growth continues to lag.  Average hourly earnings only rose 0.1% MoM, down from last month’s 0.2% pace. 

Looking ahead to next week, there are several key US data releases scheduled including JOLTS job openings, retail sales, CPI, and industrial production.  The Bank of England also meets and is expected to cut rates and announce another round of quantitative easing to help boost the economy following the Brexit vote.

All three major US stock indexes closed up close to 1.50% with the S&P 500 just shy of its record high close, while Treasury yields and swap rates are flat to up two bps in the front end of the curve and down one to five bps in the belly and back end.  WTI and Brent crude are up 0.25% and 0.50%, respectively.

Have a great weekend.