Morning Minutes

Disappointing US Nonfarm Payrolls Drag Down US Yields and the US Dollar

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US index futures have shown resilience in the face of disappointing North American employment reports. Dow futures fell initially but have clawed their way back to flat, while NASDAQ futures jumped on the news and are currently up about 1.2%.

The 10-year US treasury note yield has gone into a nosedive on the employment numbers which suggest a slower than previously thought recovery, dropping toward 1.50%.  This index divergence also suggests that investors may be reconsidering the relative prospects of value plays and companies sensitive to the broader economy reopening (to which the Dow and S&P have been more sensitive lately), relative to growth/momentum plays and stocks which have benefitted form the stay-at-home economy (which the NASDAQ has been more sensitive to over the last year).

US nonfarm payrolls came in well below expectations (266K vs street 978K, previous revised down to 770K from 916K). The US unemployment rate was also worse than expected (6.1% vs street 5.8% vs previous 6.0%)

Canadian employment was worse than expected due to the impact of the latest round of lockdowns, both in terms of job losses (-207K vs street -175K and previous 303K), and the unemployment rate (8.1% vs street 7.8% and previous 7.5%).

Overnight, China announced a $42.8B trade surplus, well above the $28.1B the street had expected, and a big acceleration from the previous month’s surplus of $13.8B. Exports rose 22.2% which were up from the previous month’s 20.7% growth rate, but short of the 30.7% growth the street had expected.

The US Dollar has gone into retreat this morning with treasury yields falling, igniting a 1.3% gold rally. Copper is up 2.2% while WTI crude oil is down 0.4%. The Euro and Pound are both up 0.5% on the US Dollar today, while the Canadian Dollar is up another 0.2%.

Later this morning, the Canadian Ivey PMI report is due at 10:00 am EDT (60.5 vs previous 72.9). US President Biden is speaking at 11:00 am where he expected to speak on his infrastructure and job creation plans.

A number of earnings reports have come out between last night and this morning particularly from Canadian companies. Benefitting from soaring lumber prices and the acquisition of Norbord, West Fraser Timber* announced Q1 sales of $2.34B, up 81% from the previous quarter.   On the other hand, Air Canada continues to struggle with the impact of travel restrictions and lockdowns, having posted a $1.3B loss in Q1 as capacity fell 82% from a year ago and revenues fell 80% to $729M.

US overnight corporate news have been mixed. Earnings reports were headlined by Square ($0.41 vs street $0.16), Roku ($0.54 vs street -$0.13), and Beyond Meat (-$0.42 vs street -$0.19). Peloton announced a $165M writedown related to its recent treadmill recall. Pfizer and BioNTech announced that they are seeking full regulatory approval (they currently have emergency approval) for their COVID vaccine which would allow them to market their product directly to consumers.  

*Shares of West Fraser Timber are held in portfolios managed by SIA Wealth Management.

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Colin Cieszynski, Chief Market Strategist

Colin Cieszynski, CFA, CMT
Chief Market Strategist
ccieszynski@siawm.com
+1 (647) 282-4428

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