NFP React: Jobs Roaring Back, Stocks Pop, Dollar Strengthens, Yields Higher, Oil and Metals Markets Closed, Bitcoin Higher

The hiring spree has officially started in the US and Wall Street knows that it will take several months of monstrous job gains to trigger the taper tantrum. The equity market party is in the early stages as the US will likely add between 500,000 and a million jobs over the next few months.

The March employment report showed 916,000 jobs were created, higher than 660,000 consensus estimate and 800,000 whisper number, but below the highest forecasts of 1 million. The Unemployment rate improved to 6.0%.

Leisure and hospitality, public and private education, and construction jobs are starting to return, and this is great news for the cyclical rotation trade.

The participation rate ticked higher to 61.5% but was nothing to brag about and is still a couple percentage points below where the economy was before the pandemic.

Average hourly earnings came in lower-than-expected as lower paid wages came back to the workforce. Wages data over the next few months won’t be tracked as closely.

S&P 500 futures rose sharply with decent volume following the stronger-than-expected employment report. Treasury yields are also rising and will probably have more momentum when markets reopen next week. US stocks will remain attractive, but that could change quickly if Treasury yields start to surge again.

FX

The dollar took a while to react, but eventually rallied to the strong US labor report. Currency traders couldn’t ignore the move in Treasury yields and some have started to price in a return of dollar dominance.

Hiring is accelerating in the US, but not at a runaway pace, which should benefit the high-beta currencies. If the US added over a million jobs, the dollar would have rallied immediately and across the board . The 10-year Treasury rose 3.9 basis points to 1.709%. If the 10-year Treasury yield attempts to recapture the highs seen earlier in the week, the dollar rally could accelerate.

Infrastructure

President Biden’s bold infrastructure plan was quickly met with strong opposition from Senate Republican leader McConnell. Tax increases and rising debt concerns are the key arguing points for the GOP. The Republicans are outlining their mid-term election strategy but the pressure will be on some to help secure infrastructure spending for some states.

Oil/Gold

Energy and Metals markets are closed for the Good Friday holiday, but will surely benefit from the big repricing we will see when markets reopen next week. The US economy is heating up slightly quicker than some have forecasted and that could provide a slight headwind for gold as Treasury yields rise higher. Crude prices are still trading off supply deficit drivers that will remain in place even as OPEC raises output.

Bitcoin

Bitcoin is higher and still respecting the $60,000 level. This could be an interesting weekend for Bitcoin as much of the institutional money is expected to be dormant. Weekend volatility has been somewhat of a story this year, so many crypto watchers will look to see if any whales try to take advantage of illiquid conditions.