SP futures–the best and most liquid snapshot of the broader US stock market–closed yesterday about 2 points higher than they are heading into the close today. That’s effectively ‘unchanged’ and not much of a commentary on whether today’s jobs report was bad or good for stocks.
It was good for bonds though. The lack of an ultimate reaction in stocks combined with the fact that the net job gain was higher than forecast (NFP gained more in revisions than the amount by which it missed the forecast on the headline) makes today’s bond rally interesting.
By all rights, the jobs report was strong. Apart from that “net gain” argument, the labor force participation rate also increased while all main measures of unemployment and underemployment decreased. Wages didn’t hit their forecast, but neither did they fall. It was not the kind of jobs report that has historically resulted in a half point gain in MBS and an 8bp drop in 10yr yields.
The conclusion here is that bond markets were, indeed, ready and willing to rally and simply needed permission from today’s data and related market trading. With stocks flat and NFP not doing anything crazy like coming in over 300k, permission was granted. The laundry list of other factors discussed this morning were then free to matter a little more.
Finally, it’s potentially important to note the following resilient anecdotes for bonds. The rally didn’t stop when stocks bounced off their lows. Before that, the stock lever looked like it might have been connected. The rally happened in spite of a holiday-punctuated week ahead, which contains a Treasury refunding beginning on Monday–an event that normally causes some hesitation in bond markets. The takeaway is that the “all things being equal” scenario–the backdrop against which next week’s reality will be painted–is looking positive.