U.S. Indexes were heavily sold on Friday, concluding what has been a grim week for risk assets amid the start of the Middle East conflict. In addition to that, markets got a further hit on a quite dismal US jobs report, which saw the headline plunge 92k (exp. 59k, prev. 126k), unemployment rate tick higher to 4.4% (prev. & exp. 4.3%), and wages unwelcomingly accelerate/sticky. Further adding to the woes, and hitting the tech/semi sector, including Nvidia, were Bloomberg reports that Oracle and OpenAI end plans to expand data centre site. However, US indices pared some of this weakness as CNBC, citing a source, refuted this, saying existing plans remain on track. Adding more pressure, there were further private credit worries amid reports that BlackRock (BLK) limits withdrawals at a private credit fund as redemptions mount. All sectors, aside from Consumer Staples, were in the red given the aforementioned news. As has, of course, been the theme this week, the crude complex extended their record-breaking week of gains, with WTI and Brent higher by USD 25/bbl to last week’s Friday settlement. Attention firmly resides on the Middle East, and also the Strait of Hormuz, with participants looking out for any weekend breakthroughs, despite how unlikely it currently seems. The Dollar pared some of its extensive strength seen this week, as the US jobs report weighed, with the Canadian Dollar outperforming on surging oil prices. Treasuries chopped to surging energy prices and a weak NFP report, while private credit concerns linger, and precious metals finished in the green. There was plenty of Fed speak ahead of the blackout on Friday evening (more details below). Overall, the NFP Report was soft and raises questions about whether the labour market has truly stabilised. After a strong jobs report in January (+126k, revised from 130k), the economy lost 92k jobs in February, far below the +59k forecast. Two-month net revisions totaled -69k, largely concentrated in December (-65k), leaving December payrolls at -17k. January job growth remained solid at 126k (initially 130k), but the revisions place the start of the year at a lower employment base, with much of Januaryʼs strength fading in the initial February reading. The March jobs report, due on 3rd April, will include further revisions to both the strong January figure and the weak February data. Regarding job losses this month, healthcare employment fell by 28k, reflecting strike activity following a 77k increase in January. Employment in information and the federal government continued to trend down, with information employment -11k and federal government employment -10k. Social assistance rose by +9k, while transportation fell by -11k. Little change was reported across other major industries, including mining, quarrying, and oil and gas extraction; construction; manufacturing; wholesale trade; retail trade; financial activities; professional and business services; leisure and hospitality; and other services. Ahead of the data, ING highlighted: “A few are warning of a softer, possibly negative number based on the very cold weather in late January and early February. If so, the dollar could get hit briefly, but losses might not endure given the Middle East risk.” The Unemployment Rate rose to 4.4% from 4.3%, against expectations for another 4.3% reading, bringing it in line with the Federal Reserveʼs 2026 median projection, which is set to be updated on 18th March. Meanwhile, wages came in 0.1% higher than expected at 0.4% M/M and 3.8% Y/Y. For the Fed, the report may prompt Waller to vote for another 25bps cut in March – he said before the data that if Januaryʼs strength unwound in February, he might support another cut. Markets are still not pricing rate cuts until September amid uncertainty around the situation in the Middle East and its economic impact, and the Fed typically takes a wait-and-see approach during periods of uncertainty. Markets now price in about 44bps of easing in 2026 versus 38bps before the data. This fully prices in one rate cut, with a 76% probability of a second. Retail sales fell 0.2% in January (prev. 0.0%), albeit not as deep as the expected decline of 0.3%, while ex-gas/autos rose 0.3% (exp. 0.0%, prev. 0.1%, rev. from 0%) and ex-autos was unchanged at 0.0%, in line with expectations. Retail control group rose 0.3%, slightly above Wall St. consensus of 0.2%, with the prior revised to 0.0% from -0.1%. Spending fell, as consumer confidence was hit, highlighted within the report as foods services & drinking places, declined for the second consecutive month, while clothing & clothing accessories store spend also pulled back further. Potentially further weighing on the consumer were harsh cold weather conditions affecting some of the country in late Jan. Fed Member Waller said we are going to see a spike in gasoline prices, but from the Fed’s point of view, it is unlikely to cause sustained inflation and added that these energy costs are likely to be passed along like everything else. On the labour market, which is Waller’s main concern and speaking before the US jobs report, said it looked like in January might be turning a corner, but will find out today whether it was a signal or not. Of course, as seen from the dataset, it was not a turning corner and February’s. release was truly dismal. Waller reiterated if there is strength in the labour market, he would be willing to pare back his rate cut bets, but after the data on Friday that is exceedingly unlikely given how weak it was. Prior to the NFP release, remarked that if we get a bad jobs number, and January numbers revised down, why would they just sit on their hands?. Regarding the private credit market, the influential Governor does not see big or widespread problems and headlines they have seen do not seem to be systemic. Fed Member Miran is hesitant to read too much into one month’s job report and noted how policy is pretty mis calibrated from here. The forever dove reiterated that Monetary Policy is too tight and that the neutral rate is like 2.5-2.75%; hopes the Fed votes to cut at this month’s FOMC meeting, and he will be a dissenter if not. Miran echoed the fact that the Fed should cut rates to neutral, then re-estimate. He also added the Fed typically does not respond to oil prices, and if anything it biases him towards even more dovish policy, and that oil shock can weigh on core inflation by hurting demand. Fed Member Hammack sees no imminent need to change the stance of monetary policy in an economy where inflation is still “too high”. The Cleveland Fed President added that given the Fed’s need to balance “elevated” inflation and a “softening” job market, these factors, joined with rate cuts done last year, leave monetary policy “in a good position”. Under her base case, she thinks policy should be on hold for quite some time as they see evidence that inflation is coming down and the labour market stabilises further. Hammack noted that it’s easy to envision other scenarios, as well, so she sees two-sided risks to rates. Finally, Fed Member Daly said the latest jobs report has her attention, noting she hoped last year’s rate cuts would put a floor under the job market, but warned no single month of data should be decisive. She stressed both sides of the mandate carry risks, with the labour market appearing vulnerable. She suggested that if the breakeven rate is 30k, they are currently below that, but it is only a couple of months of data. She said she is concerned about the labour market but cites issues around strikes and poor weather. Regarding energy prices in wake of the Middle East conflict, she said the outlook depends on how long oil prices remain elevated, and the Fed does not want to act aggressively unless it knows that part. On the path ahead for rates, she said an alternative is to hold rates steady, but they are not in a position to think they should hike. “We have to be steady in the boat” whilst they collect more inflation. Elsewhere, Oil closed higher by a whopping 12% while Gold ended Friday’s session with 1.4% gain.
To mark my 3325th issue of TraderNoble Daily Commentary I am offering a special 2-Year Rate of Euro 2750 for my Platinum Service which includes 1 to 4 updated emails throughout the trading day to demonstrate this value, a monthly subscription over the same period would cost 4440 euro in total This offer represents a 38% discount and is open to both new and existing members. If anyone is interested in this offer can you please email me on bryan@tradernoble.com for details
For anyone following my Platinum Service it lost 293 points on Friday and is still ahead by 2008 points for March having closed February with a strong gain of 5482 points after ending January with a gain of 4757 points, having closed December with a gain of 2599 points, after ending the month of November with a gain of 4542 points, after ending October with a nice gain of 5110 points after closing September with a gain of 3774 points whe ending August with a gain of 3362 points after closing July with a gain of 3753 points after closing June with a gain of 3530 points, having closed May with a gain of 3606 points, after closing April with a gain of 7685 points after closing March with a gain of 2254 points while closing February with a gain of 4180 points. January ended with a gain of 2768 points while 1997 points were gained in December. October ended with a gain of 2179 points, after closing September with a gain of 4402 points, following a loss of 301 points in August. July gained 1908 points while June saw a gain of 2074 points. The Platinum Service made a record 9619 points in October 2022. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 2300 points. I have a YouTube Channel which contains recent interviews I have given This can be viewed by clicking HERE Please subscribe to this for new interview notification
Recent Comments