The April jobs report was weaker than expected

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Published Date 5/3/2024

Rates declined and MBS prices increased on the April employment data at 8:30 am ET this morning. Stock indexes increased.

April unemployment rate increased to 3.9% from 3.8%, NFP jobs increased 175K, the lowest job growth in six months with forecasts at 240K. Private jobs were thought to be +190K, reported +167K. Average hourly earnings month/month +0.2% against forecasts of +0.3%, year/year +3.9%, the lowest in three years (estimates +4.0%) and down from 4.1% in March. The labor participation rates unchanged at 62.7%. March NFP jobs revised from 303K to 315K, private jobs in March revised from 232K to 243K.

The initial reaction dropped the 10 year note rate 10 bps to 4.49% and decisively broke the three-week range that had kept the 10 from moving below 4.58%. MBS prices at 9 am +43 bps from yesterday’s close. The DJIA in futures trade prior to the 9:30 am open +500, NASDAQ +287 S&P +60.

The report weaker than thought will increase the idea the next move by the Fed will be to lower the FF rate, although we don’t see this as a trend yet. One report of good data for interest rates isn’t conclusive by any means but will push rates down which is what we want. The 10 year note so far has been volatile, the low 4.46%, high 4.59% prior to the 8:30 am employment data. The immediate reaction to the weak jobs data has traders now looking for a rate cut in September. Yesterday after the FOMC and Powell on Wednesday traders were reluctant to price a rate cut this year, until today the recent data; CPI, PPI, PCE inflation data have been increasing; now weak jobs imply inflation going forward may be inching lower. Always a volatile report but this time moving lower for rates.

At 9:30 am the DJIA opened +567 after increasing 323 yesterday, NASDAQ opened +291 from +235 yesterday, S&P +63 added to +46 yesterday. The 10 year note at 9:30 am 4.48% -10 bps. FNMA 6.0 30 year coupon at 9:30 am +44 bps from yesterday’s close and +73 bps from 9:30 am yesterday.

At 9:45 am April PMI final composite index expected at 50.9 increased to 51.3.

At 10 am April ISM services sector index, thought to be 52.0 from 51.4, reported at 49.4; now in contraction under 50.

Nothing left on the table the rest of the day. Our short term technicals now on the positive side after negative for weeks.

Source: TBWS

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