Gains Accelerate Late-day, but to No Avail…..

U.S. equities rallied in the final hour, but lost steam in the final minutes to finish mixed, but higher on a weekly basis, as a volatile start to the year continues. The markets digested a much stronger-than-expected January nonfarm payroll report that showed job growth trounced estimates and December’s figures were revised sharply to the upside, while the unemployment rate unexpectedly ticked higher, likely as a result of more people rejoining the workforce. The moves came amid a noticeable rise in Treasury yields, on the back of a drop in prices, as the markets continue to grapple with whether the Fed may have to be more aggressive than expected in its tightening campaign. The U.S. dollar ticked higher, and crude oil prices continued to rally, while gold traded modestly to the upside. Meanwhile, the earnings front seemed to offer support, headlined by e-commerce behemoth Amazon, as well as Snap and Pinterest, but Ford missed quarterly estimates. Europe finished lower following data and yesterday’s monetary policy decisions from the European Central Bank and the Bank of England, while stocks in Asia were higher with markets in Hong Kong leading the charge in its return to action following an extended holiday break.

The Dow Jones Industrial Average lost 21 points (0.1%) to 35,090, while the S&P 500 Index increased 23 points (0.5%) to 4,501, and the Nasdaq Composite rallied 219 points (1.6%) to 14,098. In heavy volume, 4.6 billion shares of NYSE-listed stocks were traded, and 4.0 billion shares changed hands on the Nasdaq. WTI crude oil jumped $2.04 to $92.31 per barrel. Elsewhere, the gold spot price traded $3.70 higher to $1,807.80 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.1% to the upside at 97.26. Markets were higher for the week, as the DJIA was up 1.1%, the S&P 500 gained 1.6%, and the Nasdaq Composite jumped 2.4%.

Nonfarm payrolls jumped by 467,000 jobs month-over-month (m/m) in January, well above the Bloomberg consensus estimate of a 125,000 rise, while December’s figure was adjusted decisively higher to an increase of 510,000 from the initial reading of a 199,000 gain. Excluding government hiring and firing, private sector payrolls advanced by 444,000, versus the forecasted rise of 35,000, after increasing by 503,000, revised noticeably higher from the preliminarily reported 211,000 gain in December. The labor force participation rate also rose solidly to 62.2% from December’s unrevised 61.9% figure, where it was expected to remain. The prime age labor force participation rate—ages 25-54 years—also nudged higher from 81.9% to 82.0%. The Bureau of Labor Statistics (BLS) said employment growth continued in leisure and hospitality, in professional and business services, in retail trade, and in transportation and warehousing.

The unemployment rate rose to 4.0%, with forecasts calling for it to remain at December’s 3.9% rate. The underemployment rate—including total unemployed and those employed part time for economic reasons, along with people who are marginally attached to the labor force—fell to 7.1% from the prior month’s 7.3% rate. The BLS said those employedpart time for economic reasons continued to trend down, and the long-term unemployed—those jobless for 27 weeks or more—declined to 1.7 million, down from 4.0 million a year earlier but is 570,000 higher than in February 2020. Also, the report showed the number of permanent job losers was little changed at 1.6 million but is down 1.9 million from a year earlier.

Average hourly earnings increased 0.7% m/m, north of projections calling for a rise of 0.5%, after matching December’s downwardly-revised rise. Compared to last year, wages were 5.7% higher, topping forecasts of a 5.2% rise. Finally, average weekly hours dipped to 34.5 from December’s unrevised 34.7, versus estimates to be unchanged.

Treasuries fell following the jobs data, as the yield on the 2-year note jumped 11 basis points (bps) to 1.30%, the yield on the 10-year note was 9 bps higher at 1.92%, while the 30-year bond rate rose 8 bps to 2.22%.

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