Last Friday’s all-important payrolls data provided precisely the balance that I was referencing in my “Not too hot, not too cold” title on Friday before the opening bell. The top line jobs growth for the month of February was certainly well above consensus at 242k versus 190k, but the internals of the report dampened the impact of the jobs gains by underscoring two familiar themes; a lack of Average Hourly Earnings growth and a continued stall in the Average Workweek. Those two themes are closely looked at in terms of providing context for the degree to which demand and inflation are present in the payrolls data. As expected, the official unemployment rate remained unchanged at 4.9%. Net/net, the report provided just enough balance for investors to leave markets with a modestly positive close for the session. Friday was the fourth consecutive day of gains for equity markets, which also posted their third consecutive week of gains, for the first time in 2016.
Across the board, equity markets rose on Friday with the Dow Industrials leading the way with a gain of 0.37%. The S&P 500 rose 0.32% and the Nasdaq gained a modest 0.20%. Volume was mixed, falling sharply on the Nasdaq (-16.85%) while expanding aggressively on the NYSE (+19.72%). From a Sector Heat Map perspective, industrials outperformed to the upside by gaining 1.16%, followed by materials (+0.88%). Markets remain in a confirmed uptrend.Markets remain in a confirmed uptrend.
In recent notes I have outlined the importance of the February 11th lows for equity markets and for crude WTI. I have been negligent in not tying copper into that narrative as well. Long considered an indicator of global demand, copper has been under tremendous selling pressure for much of the past twelve months. On May 12, 2015, copper closed at 293.15 and in the process posted what would be its 52-week high. Since then, along with virtually every other asset class, copper has fallen sharply into correction. However, that trend lower changed on January 15 when copper closed at 194.35, establishing at 52-week low. Since then and particularly since February 11th, copper has rallied sharply gaining 16.28%. Copper’s rebound, along with the turn in equities markets and crude pricing have turned what was the worst start in the history of modern markets into a more digestible, though difficult Q1 thus far.
The week ahead will again be dominated by the Economic Calendar with earnings season having concluded and with the FOMC Meeting coming up.
Tuesday we receive the NFIB Small business Optimism Index. Wednesday the Wholesale Trade and EIA Petroleum Status Report are released. Thursday, Weekly Jobless Claims and on Friday, Import and Export Prices. Make no mistake about it, though the calendar outlined above is light on data, every bit of it will feed into the FOMC Meeting narrative next week.