Entering today the market-cap weighted S&P 500 is on track to record its 17th weekly gain in the last 19 weeks. The cushion for doing so, however, is a bit thin, as it sits just 0.39% higher for the week in front of today’s opening bell.
That’s still pretty good considering it had declined 1.1% over the first two sessions of the week. It’s still pretty good, too, considering it closed at a new record high yesterday. Even better, however, has been the performance this week of the equal-weighted S&P 500, which is up 1.1%, reflecting some broader buying efforts that have been masked by pockets of weakness in the mega-cap space.
The best, though, has been the Philadelphia Semiconductor Index. It is up 4.8% for the week, spearheaded by a 12.6% gain in NVIDIA (NVDA).
Not surprisingly, a lot of attention is being paid to the prospect of a consolidation period for the market, but like we alluded to in this column on Monday, the absence of the pullback everyone is seemingly waiting for has been the catalyst for why stocks like NVIDIA, and indices like the S&P 500, have continued to move higher on a momentum/fear-of-missing-out trade.
Speaking of momentum, it is still there in the labor market. It might have slowed some, but there has been no retrenchment in hiring activity. February nonfarm payrolls increased by 275,000 following a downwardly revised 229,000 (from 353,000) in January. The unemployment rate jumped to 3.9% from 3.7% while average hourly earnings growth slowed to just 0.1% in February from 0.5% in January.
This report included some sharp downward revisions to January nonfarm payrolls and private sector payrolls; nonetheless, the three-month average for nonfarm payrolls increased to 265,000 from 234,000.
The key takeaway from the report, accounting for the fresh data and the revised data, is that it fits the soft landing/no landing narrative that is integral for a positive earnings growth outlook. In that regard, then, it has provided some validation for the stock market’s run to record highs.
The equity futures market reversed earlier losses in its wake. Currently, the S&P 500 futures are up 13 points and are trading 0.4% above fair value, the Nasdaq 100 futures are up 38 points and are trading 0.3% above fair value, and the Dow Jones Industrial Average futures are up seven points and are trading 0.2% above fair value. The 2-yr note yield is down seven basis points to 4.44% and the 10-yr note yield is down three basis points to 4.06%.
Notable headlines from the February Employment Situation Report:
- February nonfarm payrolls increased by 275,000 (Briefing.com consensus 195,000). The 3-month average for total nonfarm payrolls increased to 265,000 from 234,000. January nonfarm payrolls revised to 229,000 from 353,000. December nonfarm payrolls revised to 290,000 from 333,000.
- February private sector payrolls increased by 223,000 (Briefing.com consensus 150,000). January private sector payrolls revised to 177,000 from 317,000. December private sector payrolls revised to 214,000 from 278,000.
- February unemployment rate was 3.9% (Briefing.com consensus 3.7%), versus 3.7% in January. Persons unemployed for 27 weeks or more accounted for 18.7% of the unemployed versus 20.8% in January. The U6 unemployment rate, which accounts for unemployed and underemployed workers, was 7.3% versus 7.2% in January.
- February average hourly earnings were up 0.1% (Briefing.com consensus 0.3%) versus a downwardly revised 0.5% (from 0.6% in January. Over the last 12 months, average hourly earnings have risen 4.3%, versus 4.4% for the 12 months ending in January.
- The average workweek in February was 34.3 hours (Briefing.com consensus 34.3), versus an upwardly revised 34.2 hours (from 34.1) in January. Manufacturing workweek was little changed at 39.9 hours. Factory overtime increased 0.2 hour to 3.0 hours.
- The labor force participation rate held steady at 62.5%.
- The employment-population ratio decreased to 60.1% from 60.2% in January.
Separately, there was a mixed slate of earnings results and guidance last night that has generated some mixed responses. Broadcom (AVGO), Marvell Technology (MRVL), Costco (COST), and MongoDB (MDB) are trading lower in pre-market action while DocuSign (DOCU), Gap (GPS), and Guidewire Software (GWRE) are trading higher.
One might find reason to say that President Biden’s State of the Union Address, which called for a “billionaire tax,” higher corporate tax rates, and caps on prescription drug costs among other things, has also generated some mixed responses befitting party lines.
Politics aside, the stock market is on course at this time to walk a biased line to the upside at the open.
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Originally Posted March 8, 2024 – February employment report in soft landing/no landing sweet spot
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