March Nonfarm Payrolls Report: The U.S. Labor Market Remains Strong

What you need to know…

On Friday the Labor Department reported March nonfarm payrolls, which showed that the U.S. economy added 236,000 jobs, which was near the 238,000 expectation. The unemployment rate ticked lower to 3.5% from 3.6%.

The U.S. stock markets were closed on Friday in honor of the Good Friday holiday.

On Thursday the S&P 500 Index ($SPX) (SPY) closed up +0.36%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.01%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +0.74%.

Stock indexes Thursday recovered from early losses and closed higher.  Positive comments Thursday from St. Louis Fed President Bullard sparked a rally in bank stocks that boosted the broader market when he said incoming Q1 economic data is stronger than expected and that "financial stress seems to be abated, at least for now.” 

Stocks Thursday initially moved lower, with the Nasdaq 100 falling to a 1-week low on increasing concerns that the economy is slowing.  Thursday’s weekly initial unemployment claims report showed continuing claims, which include people who have received unemployment benefits for a week or more and are a good indicator of how hard it is for the unemployed to find a new job, rose to a 15-month high.

U.S. weekly initial unemployment claims fell -18,000 to 228,000, showing a weaker labor market than expectations of 200,000.  Also, weekly continuing claims rose +6,000 to a 15-month high of 1.823 million, showing a weaker labor market than expectations of 1.700 million.

Thursday's comments from St. Louis Fed President Bullard were supportive for stocks when he said incoming Q1 economic data is stronger than expected and inflation has declined but remains too high.  He added that "financial stress seems to be abated, at least for now, so it's a good moment to continue to fight inflation and try to get on that disinflationary path."

On the positive side for equities, bank stocks rallied after St. Louis Fed President Bullard said the "financial stress seems to be abated, at least for now.  “  Also, Alphabet rose more than +3% after the Wall Street Journal reported that the company plans to add conversational AI features to its search engine.

On the negative side for equities, Airbnb tumbled more than -4% after a report from the Bear Cave said the company is increasingly reliant on professionally managed properties that also compete against it.  Also, semiconductor stocks moved lower and weighed on the overall market after Applied Materials and KLA Corp were downgraded.

The recent turmoil in the banking industry has prompted investors to shift funds into money market funds.  According to the Investment Company Institute, about $49.1 billion was poured into U.S. money market funds in the week of April 5 to a record $5.25 trillion. 

Global bond yields Thursday fell after today’s weekly jobless claims were higher than expected, adding to evidence that the U.S. labor market was slowing.  The 10-year T-note yield dropped to a 6-3/4 month low of 3.248% and finished down -2.1 bp at 3.290%.  Also, the 10-year German bund yield fell to a 1-1/2 week low of 2.120%, and the 10-year UK gilt yield fell to a 1-1/2 week low of 3.374%. 

Overseas stock markets Thursday settled mixed.  The Euro Stoxx 50 closed up +0.26%.  China’s Shanghai Composite closed unchanged, and Japan’s Nikkei Stock Index closed down -1.22%. 

Today’s stock movers…

A rally in bank stocks Thursday was supportive of the overall market.  First Republic Bank closed up more than +4%.  Also, KeyCorp (KEY) and Comerica (CMA) closed up more than +3%. In addition, Fifth Third Bancorp (FITB), Zions Bancorp (ZION), Wells Fargo (WFC), US Bancorp (USB), Huntington Bancshares (HBAN), Citizens Financial Group (CFG), and Truist Financial (TFC) closed up more than +2%.

Alphabet (GOOGL) closed up more than +3% to lead gainers in the Nasdaq 100 after the Wall Street Journal reported that the company plans to add conversational AI features to its search engine.

Lamb Weston Holdings (LW) closed up more than +2% after reporting Q3 adjusted EPS of $1.43, well above the consensus of 98 cents, and raised guidance on full-year adjusted EPS to $4.35-$4.50 from a prior view of $3.75-$4.00, stronger than the consensus of $3.94. 

FedEx (FDX) closed up more than +1% after Raymond James upgraded the stock to outperform from market perform.

United Rentals (URI) closed up more than +1% after BNP Paribas Exane reinstated coverage of the stock with a recommendation of outperform and a price target of $535. 

Pool Corp (POOL) closed up more than +1% after Loop Capital Markets upgraded the stock to buy from hold.

Mosaic (MOS) closed down more than -5% to lead losers in the S&P 500 after JPMorgan Chase downgraded the stock to neutral from overweight.

Airbnb (ABNB) close down more than -4% to lead losers in the Nasdaq 100 after a report from the Bear Cave said the company is increasingly reliant on professional managed properties that also compete against it. 

Costco Wholesale (COST) closed down more than -2% after it reported March comparable sales ex-fuel dropped -11.6%. 

Levi Strauss (LEVI) is down more than -16% after reporting a Q1 gross margin of 55.8%, below the consensus of 56.9%. 

Lumentum (LITE) closed down more than -9% after reporting preliminary Q3 net revenue of $380 million-$384 million, well below the consensus of $444.1 million. 

Applied Materials (AMAT) closed down more than -2%, and KLA Corp (KLAC) closed down more than -1% after BNP Paribas Exane downgraded both stocks to neutral from outperform.

Across the markets…

June 10-year T-notes (ZNM23) on Thursday closed down -1 tick, and the 10-year T-note yield fell by -2.1 bp to 3.290%.  June T-notes Thursday matched Wednesday’s 1-1/2 week high, and the 10-year T-note yield fell to a 6-3/4 month low of 3.248%. Additional evidence of U.S. labor market weakness gave T-note prices an early boost Thursday after weekly jobless claims were higher than expected.  However, T-notes gave up their gains after stocks recovered from early losses and moved higher.  Also, T-notes were undercut by comments from St. Louis Fed President Bullard, who said the "financial stress seems to be abated, at least for now, so it’s a good moment to continue to fight inflation and try to get on that disinflationary path."

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