Happy Jobs Friday,

After gapping higher at the open on Wednesday US equity markets have been drifting lower amidst some profit taking following a sharp rally from last week’s lows. Trough to peak the S&P 500 was up nearly 500pts (~6.5%) in less than a handful of trading sessions. Taking some of the wind out of the sails over the past couple of days were the bounce in oil prices and Treasury yields as shots were fired in the Red Sea and details of the Iran/Oman proposal were leaked to the press. The proposal blocks the travel of US/Israeli ships and includes a fee, which has been a red line for the administration. The S&P 500 ended yesterday’s session down 0.2% just over 7,700 while the equal-weight/small cap indices were down a little more than 0.5%. Energy was the only sector with meaningful gains while mega-cap tech/semis outperformed. Software was under pressure after a couple of disappointing earnings reports.

Futures were pointing to a higher open ahead of this morning’s jobs report as oil prices and yields were both pulling back modestly. The jobs report was disappointing with nonfarm payrolls falling 23k along with a negative revision of 103k to the previous two months. There were big declines in government (-53k) and leisure & hospitality (-40k) which some are discounting given the potential seasonal impact on gov’t and unwind of World Cup in the latter. Total private hiring was up 30k in line with the revised reading from last month as construction was the positive standout (+22k). The unemployment rate actually ticked down to 4.1% with a decline in the labor force while participation rate was also down 0.1% from last month to 61.4%. Wages came in below expectation up 0.1% (vs. 0.3%) while the workweek was unchanged at 34.3.

Rates markets reacted swiftly with the 2yr down falling ~10bps at the lows as markets recalibrate rate hike expectations. The USD also moved lower. Just after 8:30 Japan’s Finance Minister said lines of communication with the Treasury are open and “both sides won’t hesitate to intervene”. The Yen rallied sharply from ~158.50¥/$ to ~157. Equity futures pretty much doubled gains after the report with S&P futures up ~0.5% and Russell 2k futures up nearly 1% but we have pulled back from the highs. The volume of earnings since the close was very heavy but as the size of companies reporting gets smaller there is less of an impact on the broader tape. Tech is pretty well bid with semis and memory stocks rallying in the pre-market. Software is also trading higher after a couple of positive earnings reports (TEAM/NET +>15%).