Before the markets re-opened following Friday’s holiday, it was quite apparent that the March employment situation did not do the market any favors. All of the major equity indices opened the day deep in the red thanks to an extremely disappointing jobs report, noting the creation of only 126,000 jobs in March which fell way short of the consensus estimate of 247,000 jobs created and the downwardly revised 264,000 reading in February. In fact, January and February were revised down a net 69,000 jobs. The unemployment rate held steady at 5.5% and matched expectations, while the labor force participation rate edged down marginally to 62.7% from 62.8% in February. Ultimately, this employment report will simply add to the arguments by the doves in the Federal Reserve that rate hikes should be delayed even further. It is hard to pinpoint precisely what is driving the rally across the major indices, but it’s quite clear that the ambiguous timing of the Fed’s rate hikes is helping contribute to the push higher.

Today’s market certainly made some wild swings although the one major economic release of the day appears to be making a difference as well. The Institute for Supply Management (ISM) noted that although the manufacturing sector may be soft at the moment, the rest of the economy is relatively strong. ISM’s non-manufacturing reading of the purchasing managers’ index (PMI) posted a strong headline reading of 56.5. This reading came in shy of consensus at 56.7 and the prior month’s reading of 56.9, but still points to a strong expansionary phase in the service sector. New orders were particularly strong at 57.8, as well as backlog orders at 53.5 – both very important readings. The employment component was also very strong at a 5-month high of 56.6. The overall broad strength in the ISM reading is encouraging with 14 of 18 industries surveyed noting growth in March. Management services led the sector to the upside, while construction also noted positive growth during the month. The four weakest industries included mining and education. The strong dollar continues to be in focus as weakness in foreign demand for US goods is putting more of the burden on the US consumer to keep the economy chugging along. However, it appears that with employment trends solid is the ISM non-manufacturing index, consumers are starting to do their part.