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US February Job Growth Surges By 379,000; Bond Yields Jump Past 1.6%

Inflation bets were back in focus after the U.S. economy added a much bigger-than-expected 379,000 new jobs in February.

The U.S. economy added nearly 400,000 jobs last month, the Labor Department said Friday, triggering a renewed rise in government bond yields as investors bet on a faster post-pandemic recovery.

The Bureau for Labor Statistics said 379,000 new jobs were created last month, tipping the headline unemployment rate down to 6.2%. The February tally was far higher than the market forecast of 185,000 and suggests the gradual re-opening of non-essential business, as well as construction and manufacturing, accelerated along with the country's vaccine rollout.

"The labor market continued to reflect the impact of the coronavirus pandemic," the BLS said. "In February, most of the job gains occurred in leisure and hospitality, with smaller gains in temporary help services, health care and social assistance, retail trade, and manufacturing."

"Employment declined in state and local government education, construction and mining," the BLS added. 

Earlier this week, a reading of private sector job growth from payroll provider ADP indicated a weaker-than-expected 117,000 new positions were created last month, while the Labor Department's tally of weekly jobless claims jumped by 9,000 to 745,000 for the period ending on February 26. 

Stock futures, meanwhile, are trading higher following the BLS release with contracts tied to the Dow Jones Industrial Average indicating a 200 point opening bell gain.

Contracts tied to the S&P 5500, which is up only 0.33% for the year, are priced for a 23 bump while the Nasdaq, which is down more than 10% from its February 12 closing high, is set for a 50 point advance. 

Benchmark 10-year Treasury bond yields, meanwhile, jumped to a one-year high of 1.619% and the U.S. dollar index, which tracks the greenback against a basket of six global currencies, was marked 0.5% higher at a three-month high of 92.10.

"With the S&P 500 more heavily weighted toward those sectors that did better last year and less heavily weighted toward the cyclical sectors that are most likely to outperform as the economy re-opens – such as Energy, Financials, Materials, etc. – it is going to be harder for the index to move higher until after the sector rotation runs its course," said Chris Zaccarelli, chief investment officer for Independent Advisor Alliance.

"Once investors have re-allocated their portfolios to take advantage of the tailwinds behind cyclical and value stocks, the stock market will be able to start moving higher again as improving economic growth raises earnings for all companies – both those that did well last year as well as those that are still in the process of normalizing," he added.