US Stock Market Overview – Stocks Surge Following Robust Jobs Data

US stock prices surged higher following the jobs data. All three major US averages closed in the black with the Nasdaq leading the way surging 1.58%.  The better than expected US jobs data helped catapult riskier assets, led by the Russel 2000 which rallied nearly 2%. The strong jobs numbers failed to lift yields, as softer than expected inflation data released earlier in the week showed that inflation was running slower than expected.

The Oracle Likes Amazon

All sectors were higher lead by Industrials and Materials, while technology was the lager. The best perfomer was Newelle Brands which rallied 13.45%. Ahead of the trading session, CNBC interview Warren Buffett at the Berkshire Hathaway annual conference. He said that one of the portfolio managers at his shop bought Amazon shares, as they believe the company is undervalued.

US Job Growth Continues to Trend Higher

The Labor Department on Friday reported that non-farm payrolls rose 263K on Friday, more than the 190K expected by economists. The unemployment rate dipped to 3.6% in April, compared to expectations that it would rise to 3.8%. Hourly earnings continue to rise, climbing 3.2%, unchanged from March.  Expectations had been for wages to rise by 3.3%. The combination of March payrolls and February payrolls were revised higher up 16K. The 2019 average year to date is 205,000 jobs per month. This is a slightly dip form 2018.

 

The U6, was unchanged at 7.3%. This incorporates discouraged searchers plus Americans stuck in part-time jobs. Workers’ wages increased by 6 cents per hour. The annual increase in wages was much stronger than the 2.8% increase in April 2018 from a year earlier. Friday’s report showed the average workweek in April fell to 34.4 hours.

The Rise in Wages has Not Spilled Over into Inflation

The rise in wages has not spilled over into inflation expectations. Early in the month, the Commerce Department reported that core Personal Consumption Expenditures, which is inflation that excludes food and energy, dropped to 1.6% year over year. Commodity pricse is on the decline which has led to an acceleration in commodity trading. Crude oil prices have tumbled as well as agricultural products. This decline in annual inflation is a concern for many, which has led to a discussion amongst market pundits that the Fed might consider dropping its dual mandate. It is unlikely that the Fed would consider easing interest rates with GDP rising at 3.2% which was released last Friday. The Federal Reserve in the US needs to target both employment and inflation. This has also led many to call for the Fed to cut interest rates, given the low level of inflation. Currently the Fed fund rate has a 6% chance of a rate cut by the end of 2019.