Market Brief – Friday 3/8/19

February’s Nonfarm Payroll report was a dud. Against expectations of a +180k print, February payrolls increased by a scant +20k. The prior two months were revised higher, but only by +12k. The report gets worse when adding the birth-death model numbers in, which added +137k jobs, meaning the actual report is a -117k jobs created for February.

The Household survey confirmed the weak jobs report by showing hiring has been essentially flat for the year. Wages increased +0.4% MoM and +3.4% YoY. Last month’s -0.3% drop in hours worked put some cold water on the wage growth numbers. Higher wages and more jobs are good, but not if existing workers are getting fewer hours.

Stocks started the day lower, following the overnight routing of Asian stocks, and Treasury yields fell as well.

Reports from China say that President Xi will not be meeting with President Trump at Mar-a-Lago. No reason was given, other than he isn’t accepting the invitation. With February payrolls sliding along with the U.S. economy, President Xi can potentially wait out President Trump, who may get desperate to strike a deal if the U.S. stock market falls alongside the economic data.

Stocks closed the day lower despite efforts by buyers to push prices back up. Treasury yields continue to fall, which should bring stock prices back near their December lows, and potentially lower. Ten-year Treasury yields closed at 2.631%, just over their critical support level of 2.62%. As yields breakdown, liquidity gets pulled from risk assets, which causes stock prices to fall.

Oil and gas producers were clobbered today and since broad equity prices have been following this sector, the broad equity market should soon experience a sell-off.

Physical gold touched its resistance level at $1,300/oz and needs to find buyers or it will likely head down to retest support at about $1,250/oz. The gold and silver miners popped today, but given how the physical metal is trading, today’s pop should be ignored.

Agricultural commodities found buyers today despite the news that President Xi will not be coming to Mar-a-Lago. This sector has quite a bit of work to do given how battered it is.

Next week there are several long-term U.S. Treasury bond auctions, which should drive interest rates further down and pull more liquidity out of the financial system. With the broad equity market and Treasury yields on the cusp of breaking down, things are going to get interesting.