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Market Update

Jobs Report Packs More Questions Than Answers

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March 6, 2015

Can you hear the collective hmmm from the stock market? The February payrolls report was good. No doubt. But great? Not really.  The U.S. created 295,000 jobs, more than Street economists on average had banked on. The unemployment rate fell to 5.5% from 5.7%, the lowest in about seven years. But the “great” news may have stopped there. Wage growth remained sluggish and more people dropped out of the labor force. This isn’t the red hot report that necessarily gets everyone, including the Federal Reserve, thinking a rate hike is needed sooner versus later. That leaves many traders, whether you’re a stock bull or just a U.S. bull, saying: Good report, thanks. Now what do I do with it?

FIGURE 1: SPX HUGGING 2100.

Bulls were anxious for the S&P 500 (SPX) to scratch back to a close above 2100. They got it on Thursday. Barely. Data source: Standard & Poor’s. Chart source: TD Ameritrade’s thinkorswim® platform. For illustrative purposes only. Past performance does not guarantee future results.

In the Details. Average hourly wages rose 3 cents to $24.78 in February, but the 12-month increase was a lackluster 2%. Employment gains for January and December were little changed. The government said 239,000 new jobs were created in January, down from 257,000. December's gain was unchanged at 329,000. Now February’s hiring was widespread, delivering the breadth that the Fed will want to see. Hiring was tallied in health care and education, as well as manufacturing and construction. But overall, more people also stopped looking for work last month, reducing the percentage of Americans in the labor force just a touch to 62.8%. That’s near the lowest level since the late 1970s. And that’ll be a head-scratcher for the Fed as it looks to upcoming interest-rate changes.

Dollar Muscle. The U.S. dollar continues to flex its strength against the euro (and others), a bruising move in fact for U.S. multinationals who’ve already warned of the currency drag on earnings. The imminent start of the European Central Bank’s 1.1 trillion euro bond-buying program aimed to revive growth there helped push the shared currency lower. On Thursday, the greenback scored a roughly 12-year high against euro, with one euro fetching $1.03. It moved just off that number in the build-up to the U.S. jobs number.

Coming Next Week. We’ll get a sense of the mindset of select retail investors with the latest TD Ameritrade Investor Movement Index® (IMX), out Monday. Refresher: IMX tracks holdings/positions, trading activity, and other data from a sample of our 6 million funded client accounts. Net buyers? Net sellers? Let’s see. Deeper into the economic calendar, Fed-favorite JOLTS data is issued, which gives an idea of the churn in the labor market. And on Thursday, monthly retail sales data—another important part of the equation as we demand evidence that job creation is translating into stronger consumer spending.


Good trading,
JJ
@TDAJJKinahan

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