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Mr. Market Slams the Bear Hammer Down After Hot NFP Report


Today's financial recap and tomorrow's financial outlook.

Following a long stretch of near-zero volatility, the S&P 500 broke down hard following the release of the February NFP report.

The index fell 1.4% to 2071.26, the first 1%+ down day since January 30.

Nonfarm payrolls rose 295,000 in February, significantly exceeding the 235,000 consensus.

The unemployment rate fell to 5.5% from 5.7%.

On the negative side, average hourly earnings rose just 2.0% year-over-year, which was below the 2.2% gain expected by economists.

Even with the income disappointment, the report was considered strong enough to support a Federal Reserve interest rate increase in June. In an early afternoon radio interview, Federal Reserve Bank of Richmond Jeffrey Lacker specifically supported that notion.

The US Dollar Index rose 1.31%, and US Treasury yields saw sharp increases, pushing bond prices broadly lower.

The strong dollar put a nasty beating on commodities, with gold, silver, and crude oil all falling more than 2%.

The Volatility Index (VIX) rose 10.4% to 15.44 as traders bid for protection.

The increase in rates gave financial stocks a short-term boost.

At one point this morning, the Financial Select Sector SPDR ETF (XLF) was up 1%, but it got caught in the broader market downdraft and finished down 0.7%.

S&P Dow Jones announced that Apple (AAPL) willl replace AT&T (T) in the Dow Jones Industrial Average (DJI) after the close of trading on Wednesday March 18.

Apple rallied early but fell into the close to finish up just 0.15%.

Biotech stocks were once again in focus today as they tailed off at the open, ahead of the broader market averages. The sector is widely seen as leading the market.

Traders continue to debate whether biotech in a bubble, with the NASDAQ Biotechnology Index ETF (ETF) having rallied 15% year-to-date following a 34% run in 2014.

While traders focused squarely on the NFP report as the proximate cause for today's heavy selling, the market had been showing clear signs of froth in the past week or so.

Market indicators like the Investors Intelligence Sentiment Index, AAII Sentiment Survey, ISE Index, and NYSE Margin Debt have shown very bullish sentiment as of late, which is common at market tops. 

Therefore, an argument could be made that the market was living on borrowed time and a pullback was inevitable, with or without the threat of a June rate hikes.

Monday's Financial Outlook

The news flow is likely to slow down Monday as there are no market-moving US earnings or economic reports on tap.

Apple (AAPL) will hold a launch event for its upcoming Watch product line, which should keep tech sector investors busy.

Beyond that, it's difficult to see what could drive the action beyond pure momentum as the bull/bear tug-of-war continues.

Twitter: @T3Live
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