Market Brief – Friday 2/7/20

Stocks started the day lower on renewed fears the Coronavirus is spreading and an unexpected drop in German industrial production. Investors remained undeterred and eagerly bought the dip, but despite trying, stocks remained red in early trading. After holding overhead support, Treasury yields fell sharply on the same news as they look to retest their end-of-January lows.

German industrial production fell -3.5% in December and -6.8% from this time last year. French industrial production fell -2.8% in December and -3.0% from this time last year.

January Nonfarm payrolls surprised to the upside by coming in at +225k jobs created against expectations of a +160k print, with +141k of January’s jobs made up from the BLS’s fictitious birth-death model. The prior two months were also revised slightly higher. While Bullish investors celebrated the news, the BLS is well known for overstating their numbers, as evident by today’s announcement of -514k jobs created in 2018.

Most of the hiring was in private payrolls, which rose +206k while manufacturing payrolls fell -12k. The participation rate rose slightly to 63.4% and the unemployment rate rose slightly to 3.6%. Average hourly earnings rose +0.2% and a staggering +3.1% from this time last year. Hours weekly hours remained flat at 34.3 hours as well as manufacturing hours which showed no change.

Wholesale inventories fell -0.2% and trade sales fell -0.7% in December.

The New York Fed accepted bids for $42.75 billion of overnight dollar loans and purchased $401 million of Floating-Rate Notes against offers of $3,590 billion.

Stocks closed lower on the day despite an attempt by investors to buy the dip. Treasury yields closed lower and bond prices rallied as Treasury bonds are once again approaching a price level that if broken, will trigger the next Bull market in bonds. Crude oil bounced off of $50 per barrel, a critical support level, twice before closing just over $50 per barrel. Outside of bonds, agricultural commodities and the dollar, the markets were a sea of red today.