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Financials Lead the Charge, as Yields Edge Higher

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Financials Lead the Charge, as Yields Edge Higher

Stocks in the US started the trading session in the black after the US Labor Department released a stronger than expected payroll report. The stronger than expected report, released before the opening bell, helped boost the 10-year yield above 2.8% for the first time in 5-week. Financials need yields to climb to benefit from borrowing short and lending long, and become the leaders as the S&P 500 takes another leg higher. Both the S&P 500 and the Dow Industrials closed in the black on Friday, while the Nasdaq edged lower led down by bio-tech firms.

On Friday, the Bureau of Labor Statistics reported that nonfarm payrolls increased by 175,000 in February, compared to the 139,000 expected by economists. Estimates were initially 152,000 on average but were revised lower following the weaker than expected ADP report released on Wednesday. Revisions showed the economy added slightly more jobs in recent months than previously believed. Employers added 129,000 jobs in January, up from 113,000 and 84,000 jobs in December, up from 75,000.

The unemployment rate ticked up to 6.7% in February from 6.6% in January. The labor force participation rate held steady at 63% in February. Economists surveyed had forecast that the unemployment rate would fall to 6.5%. The weakness in the report came in the reduction in the average work week. It slipped to 34.2 hours, from 34.3 hours in January, but was revised down from 34.4. This is worth several hundred thousand full time jobs.

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