Happy Workforce Wednesday,

Yesterday’s trading session was mixed. Following a disappointing retail sales number Treasuries rallied adding to Monday’s gains following Kevin Hassett’s comments suggesting labor market data would be weak in the coming months. The rotational activity continued with the S&P 500 ending down 0.3% while the equal weight up a similar amount. Yield oriented sectors rallied closing up >1% with the pullback in yields, which also helped the housing related stocks. Materials also outperformed with chemical companies leading the way. Outside of mega-cap tech, financials also underperformed after brokers/wealth managers became the most recent group to move lower on AI disruption concerns after Altruist launched a new tax planning offering within its AI platform. Financial data analytics companies also moved lower after disappointing S&P Global earnings.

Equity futures were slightly higher ahead of this morning’s data while Treasury yields were a touch lower. Headline nonfarm payrolls came in well ahead of expectations up 130k about 60k ahead of estimates. Private payrolls were up 172k with about two thirds of that in healthcare/social assistance. Construction (+33k) and manufacturing (+5k) both improved after being negative. Government jobs fell 42k. The unemployment rate fell to 4.3% from 4.4% with the labor force participation rate ticking up to 62.5%. The workweek improved to 34.3 while wage growth was a little stronger than expected. The household survey was also quite strong showing the number of employed people up 528k. There were big revisions to the 2025 data with seasonally adjusted nonfarm payroll revised down by 862k which was about inline with estimates (-825k to -900k). So it doesn’t look like Hassett got a sneak peek. Equity futures have extended gains with the S&P and Dow Jones Industrial average both up just over 0.5% while the Russell 2k is up ~1%. Treasury yields are reversing much of this week’s move lower up ~5bps. The USD index is also bouncing modestly. For the moment good is good. Over the last couple of days markets had started to pull forward the prospect of rate cuts that is being priced out again.