Dow, S&P, and Nasdaq falter and yields plunge after latest jobs report

Major market averages drifted lower on Friday as Wall Street received a stronger February employment report.


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Early on and the Dow (DJI) lost 0.1%, the S&P 500 (SP500) slid 0.4%, and the Nasdaq Composite dipped 0.5%.

The February jobs number came in stronger than anticipated. February nonfarm payrolls came in at 311K versus the expected 223K consensus level. At the same time the unemployment rate moved to 3.6% from 3.4%.

“Nonfarm payrolls rose by 311k, more than the consensus estimate,,” Schwab fixed income strategist Kathy Jones tweeted. “That’s suggests the labor market is still strong, but the lower-than-expected rise in average hourly earnings is good for the inflation outlook.”

“Big move lower in Yields,” OptionsHawk founder Joe Kunkle tweeted. “Bonds were strong ahead of the Jobs (number) and now even more so.” 

The 10-year Treasury yield (US10Y) fell 20 basis points to 3.70% and the 2-year yield (US2Y) fell 27 basis points to 4.63%.

The drop in yields was sparked yesterday by as jump in jobless claims, although those numbers won’t be in the survey period for the February payrolls.

“With the labor market appearing softer than otherwise expected, investors moved to dial back the amount of rate hikes priced for the months ahead,” Deutsche Bank’s Jim Reid said.

On Thursday, the “2yr yield saw its biggest daily decline since January 6,” he added. “”Longer-dated Treasuries also advanced … and it even meant that the 2s10s curve steepened for the first time in a week as well.”

Wall Street now places odds of a 25 basis point March rate hike at 58% while a 50 basis point hike sits at 42%. Moreover, it was just yesterday that the Street priced an 80% chance of a 50 basis point hike.

Meanwhile the banking sector (KBE) continued to struggle after plunging Thursday on worries about SVB Financial’s health and liquidity.

Among active stocks, SIVB slumped another 40% as VC firms pulled funds.

“We would argue that banks and semis are two groups that historically have been very good leading indicators,” BTIG’s Jonathan Krinsky wrote. “Typically, markets can do ok if either of them are languishing, but when one of them is having an outsized move it’s usually wise to listen. In this case, the outsized move is clearly banks to the downside.”

Now read: Selloff in financials sends Dow, Nasdaq, S&P 500 sharply lower

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