Daily Market Color

Stocks Climb, Treasurys Decline After Soft Jobs Report, Robust Manufacturing Data

The Labor Department’s employment report for August missed the market predictions for labor market growth.  There were 156,000 seasonally-adjusted new nonfarm payrolls recorded last month, nearly 25,000 lower than median forecasts.  In addition, there was a downward revision of 41,000 jobs to the previous two months figures, bringing the average monthly payroll additions in 2017 to 176,000, compared to 2016’s monthly average of 187,000. The unemployment rate similarly missed expectations, rising to 4.4% last month — albeit remaining near historical lows.  Wage growth was also lower than expected as average hourly earnings rose 0.1% MoM (+0.2% expected), bringing the YoY increase to 2.5%.  The labor force participation rate remained unchanged for the month at 62.9%.  September payroll estimates are also being revised down as the potential job impact of Harvey begins to get considered.



US manufacturing data released on the day was largely positive and helped to offset the market impact of the weak labor data.  The Institute for Supply Management’s index of factory activity reached a six-year high of 58.8 in August, exceeding median forecasts of 56.6, as production and new orders readings were both over 60.  The manufacturing employment component also jumped to its highest level in more than six years at 59.9, seemingly contradicting this morning’s jobs report which displayed a contraction in manufacturing hours worked.  The overall ISM manufacturing index has now held over 55 for three consecutive months, resolutely holding well above the 50 point threshold associated with expansion.



US Treasurys rallied immediately following the jobs report, but reversed course and traded into down for the day after the release of the strong manufacturing data.  Yields/swap rates are currently trading 1-5 bps higher across the curve and the 10-year yield is up nearly 4 bps to 2.15%.  All three major US stock indices are on pace for a second straight week of gains, up 0.1%-0.3% for the session.  Gasoline futures traded lower for the first time in nearly two weeks, down 1.8%, while WTI crude oil managed to stem its Harvey-induced losses as it posted marginal gains for the session. 
Hope you have a great (long) weekend.  US financial markets will be closed on Monday in observance of Labor Day. 

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