Stocks and yields finished Friday in the green with equity gains broad-based but the Russell outperformed with the strong April Jobs data reducing fears around the economy. In Treasuries, the curve bear flattened as traders pushed back Fed rate cut bets – both Goldman and Barclays pushed back their next rate cut calls to July from June following the data. The US NFP report came in above expectations while the unemployment rate remained steady at 4.2%, as expected. The data set the tone for the day with yields continuing to rise into settlement while stocks closed out around highs. Sectors all closed green with outperformance in Communication Services, while defensives, Consumer Staples and Utilities lagged (but still saw notable gains), with Tech also an "underperformer" but the majority of the sector was green, aside from heavyweight Apple (AAPL) after disappointing earnings on Thursday night. Amazon (AMZN) finished flat with earnings also underwhelming. In FX, the Buck was sold despite the strong NFP report but it did manage to reclaim 100 as the buck moved off the lows once Europe had left for the day. Meanwhile, Antipodes outperformed US/China trade hopes with WSJ reporting Beijing is considering a fentanyl offer to the US to start trade talks, which also helped keep stocks bid into the closing bell. Crude prices settled lower on reports OPEC+ is to bring forward the call to May 3rd to discuss June output plans, with sources reporting they are discusion a June production increase of about 400k BPD. Gold prices were hit in the risk on trade and move higher in yields, with lows seen as the Dollar staged its comeback from earlier lows. Attention next week remains on earnings, but also with the Fed rate decision and US ISM Services PMI due.
US
NFP: The April US jobs report saw 177k jobs added in the month, above the 130k forecast and down from the prior 185k (which was revised down from 228k). The unemployment rate was steady at 4.2%, in line with expectations and beneath the year-end median FOMC projection of 4.4%. Overall, it was a strong report and will allow the Fed to continue being patient, despite some concerns from Governor Waller that if they wait to see an impact in the hard data from new administration policies, the Fed runs the risk of acting too late. However, the hard data continues to signal the economy is withstanding the recent volatility and uncertainty. Looking ahead to June, WSJ’s Timiraos says "For now, it means the Fed doesn’t have to say anything on June at next week’s meeting "; adds "The April jobs report makes a June rate cut less likely … as there will only be one more employment report before then". Both Barclays and Goldman Sachs pushed back their Fed rate cut calls to July from June in the wake of the report. Elsewhere in the NFP dataset, government payrolls rose by 10k, down from the prior 15k, while those employed by the federal government declined by 9k in April. Earnings were soft, with M/M rising 0.2% (exp. 0.3%, prev. 0.3%), while Y/Y rose by 3.8%, beneath the 3.9% forecast, maintaining the 3.8% pace in March. Although the Fed has stated the labour market is not a source of inflation, the softer wage data will be seen as a positive.
FIXED INCOME
T-NOTE FUTURES (M5) SETTLED 22+ TICKS LOWER AT 111-05
T-Notes bear flatten as strong US jobs report sees traders push back Fed rate cut bets. At settlement, 2s +13.5bps at 3.836%, 3s +13.1bps at 3.819%, 5s +11.1bps at 3.924%, 7s +9.9bps at 4.113%, 10s +8.3bps at 4.314%, 20s +5.4bps at 4.806%, 30s +5.1bps at 4.788%.
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