US equities did not get an early boost from Friday’s blowout jobs report.
Instead, stocks fell and bonds rallied, with 10-year yields dropping some 7bps.
In addition to renewed jitters around the coronavirus, the market does not appear to be particularly enamored with revisions from the BLS, which trimmed employment growth in previous years. I included this earlier, but just to reiterate: Friday’s revisions show Donald Trump has not yet had a year of job gains that matches Obama’s final year in office.
As the market digested the numbers, 10-year futures bounced to session highs. The dollar, meanwhile, briefly pushed higher before retreating.
You can make of that what you will, but one overarching point on Friday is that after this week’s blistering bounce for equities, market participants are likely to take a step back before getting themselves in any deeper amid still worrisome headlines around the burgeoning pandemic.
On Friday, for example, some 27 Chinese nationals who arrived among other passengers on a cruise ship in Bayonne, New Jersey, were screened for coronavirus. None of them are from Wuhan and all but four were deemed no risk. The rest of the passengers were allowed to disembark, and the four who could not be immediately cleared were hospitalized.
Needless to say, that story was plastered all over social media Friday morning, and while there’s no way to know how much (if at all) it affected market sentiment, there is no sense in which it helped.
“We have to be a little wary given the coronavirus outbreak has the potential to derail [the US economic] story”, ING said, in an e-mailed note. “Markets appear sanguine, but at the very least the disruption to Chinese factory output and logistics operations will impact US-Asia supply chains”.
Commenting during his usual post-payrolls press junket, Larry Kudlow parroted the party line about Trump having reshaped the domestic economy. He actually referred Bloomberg’s Jonathan Ferro to the president’s SOTU address and also to Trump’s unhinged Davos press conference, as though Ferro somehow wasn’t aware that the president recently ramped up the economic bombast. The labor market is, in fact, solid and deserving of praise, but as you can see from the first chart above, the myth of an economic renaissance under Trump is still just that – a myth.
Kudlow refused to comment on whether the numbers coming out of China on virus deaths and infections could be trusted. He also struck an upbeat tone on the prospects for the trade deal, after admitting earlier this week that the “export boom” from the Sino-US truce will likely be delayed due to the shut-ins in China.
And speaking of delays, Beijing put off the release of trade data for January. Last month’s data will now be merged with this month’s numbers, the customs administration said Friday. Although that’s in line with how activity data is reported around the Lunar New Year, the change to the trade figures was not tipped ahead of time.
“The hit to the Chinese economy will… diminish the prospect of the US-China phase one trade deal delivering a meaningful uplift in demand for US made product”, ING went on to say Friday, adding that “the threat that the coronavirus outbreak poses in an environment of already subdued global growth underlines the potential for medium-term US economic weakness”.
On the jobs report, TD’s Gennadiy Goldberg described it as “rather strong” and noted that the revisions “were not quite as bad from a trend standpoint”.
As far as the risk-off reaction seen in US markets Friday morning, Goldberg echoed the above, noting that folks are once again focused on the virus and what the impact will be on the data going forward. “The next numbers are going to be weak and we’ve got the coronavirus to contend with”, Goldberg remarked.
Meanwhile, Mike Pence – known for taking a comically hard line on China – said Beijing has shown “unprecedented” transparency on the virus.
Li Wenliang would likely disagree with that assessment. But he’s too busy being dead to argue.