This month was a bit odd. The monthly employment report arrived on the second Friday, not the usual first. Regardless of timing, the heavily anticipated report proved to be a bit of a non-event.
The Nonfarm Payrolls statistic was a bit misleading. It showed an increase of 275,000 payrolls in February, well above the 200k consensus. But there were significant revisions, particularly to last month’s eye-popping 353k. That was revised lower to 229k, and the two-month revision of -167k implies that December’s report was revised down by a further 43k. Thus, the 75k beat was really a 92k miss on a three-month basis.
Other parts of the report also proved a bit lighter than expected. The Unemployment Rate ticked up to 3.9% when it was expected to match last month’s 3.7%. And in a metric that speaks not only to the “full employment” portion of the Federal Reserve’s dual mandate, but also to the “stable prices” portion, Average Hourly Earnings on a month-over-month basis rose by only 0.1%, below both the 0.2% consensus and last month’s increase of 0.5% (which itself was revised down from 0.6%). Despite those reduced readings, we still saw a rise of 4.3% on an annual basis. That is still running above the 2% inflation target, no matter how we slice it.
For better or worse, I was on a live broadcast as the numbers came in. Over the years, I’ve given plenty of immediate reactions to economic numbers, but that was on a trading desk or in front of a keyboard – not with a camera in my face. (I now have even more respect for financial news anchors who can synthesize breaking news on the fly.) When asked about how the markets might react to the report, I had noticed stock and bond futures ticking higher, and asserted that there was nothing in the numbers that would impede the upward momentum that has been in place for over four months. That today is a Friday, when weekly options also become “zero-dated”, or “0DTE”, played into my thinking.
And that assertion proved correct, at least for the first hour or so. Stocks opened modestly higher, then rallied smartly in the first hour of the day. Nvidia (NVDA) led the charge, as usual. Then something happened. NVDA stopped going up after ticking about 5% higher. And then, to the surprise of many, it actually went down! I wish I knew why. As I write, this around noon EST, I’m not sure what precipitated the turnaround. “Trees don’t grow to the sky” comes to mind. But as we’ve said before, “It’s Nvidia’s World, We’re Just Living (and Investing) in It”. For better or worse, that applies when the stock has a rare down day.
My father relayed a conversation that puts the recent FOMO-driven mind-set into perspective. He was chatting with a neighbor, one who’d never previously discussed investing. The neighbor was upset that he’s only up about 10%, and also complained about the capital gains taxes that he owes. My dad, who is retired after a long, successful career on Wall Street, told his friend that double-digit returns are never a bad thing, and historically not that common. He also reminded that owing taxes on investment profits might be distasteful, but are the consequences of profitable decisions. The neighbor then mentioned that because of his recent underperformance, he intended to amp up his risk-taking. My dad’s response: “You do realize that you’re 90 years old, right?”
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