North American employment numbers came in much stronger than expected on both sides of the border this morning, reinforcing the view that economic activity remains resilient while reducing expectations for near-term interest rate cuts. The data has sparked rallies in Treasury yields, the U.S. Dollar, and the Loonie, while putting bonds and rate-sensitive areas of the equity market under pressure.
Technology stocks had already been in retreat again this morning as investors continue to evaluate valuations following positive earnings reports but disappointing guidance from some technology companies earlier this week. The move higher in yields may add another headwind for growth-oriented sectors.
Meanwhile, retailer lululemon is down 11.1% in premarket trading after reporting earnings that slightly exceeded expectations but lowering its full-year outlook. The company reported earnings per share of $1.69 versus Street expectations of $1.68 but cut full-year EPS guidance to $10.95-$11.15 from a previous range of $12.10-$12.30. Prior to the revision, the Street had been expecting approximately $12.30.
On the economic front, U.S. nonfarm payrolls increased by 172K, well ahead of Street expectations for 85K and above the previous reading of 115K. Canada also posted a surprisingly strong employment report, with monthly employment increasing by 87K compared with expectations for a gain of 10K following a decline of 17.7K in the previous month.
U.S. equity futures are indicating a cautious start to trading. NASDAQ futures are down 1.2% while Dow futures are flat.
Overseas markets have also been weaker. In Asia, the Nikkei declined 1.3% and the Hang Seng fell 1.1%. European markets are showing more resilience, with the DAX up 0.1% and the FTSE gaining 0.4%.
Commodity markets are mixed. Crude Oil is down 0.3% and trading near $92.50 per barrel, while Gasoline is up 0.9%. Precious metals are weaker with Gold down 0.7% and Silver down 1.9%. Copper has fallen 1.5%.
In fixed income and currency markets, the U.S. 10-year Treasury note yield has rallied back above 4.50% while the U.S. 30-year Treasury note yield has climbed above 5.00%. The U.S. Dollar has strengthened in the wake of the employment reports, erasing earlier losses. The Euro is down 0.1% while the Loonie is up 0.2%.
With the weekend approaching, traders may soon begin shifting their focus toward next week’s economic calendar. The next notable report is China monthly trade data scheduled for release on Tuesday morning.