Weekly Market Commentary April 1st to April 5th 2024

Was the March jobs report a delayed April Fools’ ruse? The Bureau of Labor Statistics has had plenty of time to walk it back, but it seems they are sticking to their story. An astonishing 303,000 newly created jobs for the month, or 50% more than expected, has the economic world standing at attention. And the unemployment rate fell to 3.8% in what can only be described as a win for the proponents of leaving interest rates alone for the time being. The Federal Reserve’s rate increases were supposed to put the brakes on the economy (without crashing it) but they have done little to dent the strong employment situation. Across the board the news was good. Average Hourly Earnings (month-over-month) was up, the Labor Force Participation Rate was up, Initial Jobless Claims and the JOLTS Job Openings were virtually unchanged, and the ADP Employment report came in better than expected. All in all, a great month for workers and one that surely will figure in to the Fed’s future rate decisions. It certainly isn’t the only thing the Fed looks at, but employment is one of the best barometers for predicting recessions.

Elsewhere in the economy, the Institute for Supply Management (ISM) released their March indicators and both followed the recent trend. Services was slightly down yet still expansionary, while Manufacturing was slightly up. The real story here was that Manufacturing moved into expansionary territory for the first time in 17 months. Both of these measures surely add to the story of continued strength of the current U.S. economy. And lastly, Factory Orders bested predictions by coming in at 1.4% when 1.0% was expected after February’s adjusted -3.8% drop.

Despite the good news, the equity markets took a break from the recent all-time highs and finished down on the week. The S&P 500 Index closed at 5,204 or down 0.9% on the week; the Dow Jones Industrials fell 2.3% to 38,904; and the NASDAQ closed at 16,249 or down 0.8%.
In the fixed income market, U.S. Treasury rates were up across the board. The 2-Year finished at 4.75%; the 10-Year at 4.40%; and the 30-Year at 4.55%. The yield curve continues to flatten as we gradually get closer to a more normal, upward-sloping, curve.

Next week’s economic storyline will be dominated by the release of the March consumer (CPI) and producer (PPI) price indices. These inflation releases have become must-watch TV as the Fed jockeys and pivots its way towards eventual rate cuts. The recent trend has been a pause in falling inflation so all eyes will be on whether this is a momentary glitch or a more troubling trend.