Despite the dismal jobs report, U.S. equities are showing some resilience as we head into afternoon trading. After falling as much as -1.3% out of the gates, the S&P 500 has pared back some of its losses, currently only off -0.8% to 1,547, as of 11:30AM.
All the slack in the labor market is sure to worry the Fed, however, analysts say it probably ensures the central bank will prolong its controversial strategy of buying billions in bonds to keep interest rates low as a means to boost the economy and support the equity markets. Fed officials have said they will continue buying Treasurys and mortgage-backed securities until there is a substantial improvement in the outlook for the labor market. The timing of ending asset purchases is important to financial markets because as long as the Fed is adding to its balance sheet, then the prospect of interest rate hikes remains firmly off the table.
Additionally, stocks are receiving a bit of technical support thanks to the 1,540 handle on the S&P 500. We have seen this level hold several times today, as technicians closely watch this intraday low from 3/19. A close below this critical support level would be viewed as a very bearish technical catalyst heading into next week’s trading session as the focus turns to earnings season.