U.S. Stocks Finish Mixed Ahead of Non-Farm Payrolls

The major U.S. equity indexes closed mixed on Thursday and for the most part traded flat as investors prepared for key employment data from the government.

The blue chip Dow was up 2.46, led by Johnson & Johnson. The benchmark S&P 500 closed up 1.89, pressure mostly by the healthcare sector. The tech-based NASDAQ Composite lost 0.58%.

The price action this month suggests investor buying may have exhausted itself on March 1 after hitting record highs on the highest volume of the year after President Trump addressed Congress for the first time.

On Friday, the U.S. Labor Department will release its February Non-Farm Payrolls report at 1330 GMT. It is expected to show the economy added 200,000 new jobs last month. The Unemployment Rate is expected to drop to 4.7% from 4.8% and Average Hourly Earnings are forecast to jump from up 0.1% to up 0.3%.

The report is important because it is likely to be the final determinant of the widely expected Fed rate hike on March 15. According to the CME Group’s FedWatch tool, March rate hike expectations were 90.8 percent.

U.S. Treasurys

On Thursday, U.S. Treasury futures extended their losses in anticipation of the Fed rate hike and on the heels of a strong T-Bond auction. The benchmark 10-year note yield climbed above the key 2.60 percent level.

In other news, the U.S. Treasury Department auctioned $12 billion in 30-year bonds at a high yield of 3.17 percent. The bid-to-cover ratio, an indicator of demand, was 2.34.

Indirect bidders, which include major central banks, were awarded 61.1 percent. Direct bidders, which includes domestic money managers, bought 13.1 percent. The share of direct bidders purchase is the largest since October 2015.

Forex

The EUR/USD posted a volatile two-sided trade on Thursday after the European Central Bank left its benchmark interest rate unchanged and said it would increase its quantitative easing program should the region’s economic outlook worsen.

ECB President Mario Draghi said in a news conference that while some sentiment indicators suggest the region’s recovery may be gaining steam, “measures of underlying inflation remain low.”

“If the outlook becomes less favorable, we stand ready to increase our asset purchase program in terms of size and/or duration,” Draghi said.

Despite the wicked price action, the interest rate differential continues to favor the U.S. Dollar. On Thursday, the bond yield spread between German and U.S. government debt hit 220 basis points, near an 8-year high, ahead of the ECB’s announcement.

Economic News

U.S. employers announced plans in February to cut 36,957 jobs, a 19-percent decline from January, according to outplacement consultancy Challenger, Gray & Christmas. It was also a 40-percent year-over-year decrease from February 2016, when employers cut 61,599 jobs.

Weekly initial claims bounced back from 44-year lows, rising from 223,000 to 243,000. This was also higher than the 239,000 estimate.

Import prices also beat the estimate with a rise of 0.2% versus 0.1%. The previous month was revised upward to 0.6%.