Strong NFP Gains | 0.35% mom AHE rise | Implied FFR pricing - 1st Cut fully priced into by Aug, 66 bps of rate cuts into 2024 | Bear Steepening

 The Non-Farm payroll numbers came in at 303K, sharply higher compared to consensus expectations of 200K and +22K revision to the last 2 month figures. Average Hourly Earnings (AHE) rose 0.35% mom, hourly earnings grew at an average pace of 0.34% over the last 3 months. Yoy number grew 4.14% (prior 4.28% ), the decline in annual rates on Higher Base effects . The Labor Force increased by 469K driven by a 498K increase in employment level and reduction of 29K in Unemployment level. The Average Weekly Hours rose 34.40 from 34.30 in the prior month. The data follows release of above consensus ADP numbers and a lower level of Job Openings. The ISM Manufacturing print gave a strong beat but the Services PMI price subcomponent brought some welcome relief to the markets. The Jobless Claims data ticked slightly higher by 9K but Continuing Jobless Claims fell 19K. 

 After pricing in as much as 166bps of rate cuts into the start of the year, markets are now leaning towards the possibility of may be 1 cut or 2 cuts or no cuts. 

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The resilience of the US Economic Data 

Post the release of the data, the Fed Fund Futures Pricing for 2024 saw markets paring rate cut bets for 2024 to 66 bps from 70 bps and for Mar 2025 to 88 bps from 95 bps. One full rate cut is being priced into by the Aug policy now. 

US2s10s bear steepened by 7 bps as rate cut expectations get pushed out further and on expectations of higher neutral rate. Over the week, the 10Y Break Even Inflation Rate moved 2 bps higher to 2.37%. 

The USD Index initially rose on the NFP print but as the session progressed closed flat on the day at 104.29 and S&P 500 closed with gains of 1.1%. Gold prices printed highs of $ 2330 and Crude Oil prices touched a high of $ 91.88 but closed at $ 90.87.