The Flinchum File
Thoughtful Economic Analysis and Existential Opinions

So, Stop Studying The Stock Market Already!

07/06/2013

The Department of Labor issued their latest Jobs Report yesterday.  Of the 130 economic reports issued each month, the stock market focuses most intently on this one.  While the stock market is famous for over-reacting, it is most famous for over-reacting to this report.

Yesterday, we learned that non-farm payrolls increased by 195 thousand in June, which was more than expected.  Private sector jobs increased by 202 thousand, also more than expected.  More significantly, we learned that another 70 thousand jobs were created in April and May than earlier reported.  All of this is good news!  We have been averaging about 175 thousand  new jobs for over a year and are now averaging 199 thousand.  (The economy is slowly improving, with no thanks to Congress.)

Before the report was issued at 8:30 AM, Dow futures were up 146 points.  Normally, futures are flat or zero before the report.  This time, the market was catching up on comments made by the head of the European Central Bank (ECB) that they would maintain low interest rates “for an extended period” which caused a big rally in Europe, while we were closed for Independence Day.

Following the report, the Dow lost all 146 points and actually went negative for awhile.  But, by the end of the day, the Dow closed up 147, almost exactly where Dow futures were before the report.  So, how do you interpret the market’s reaction?

Either the market ignored the good Jobs Report or the market ignored the big rally in Europe or the market simply reflected the fact that most traders had already escaped Wall Street and were in the Hamptons for a long weekend.

You do know you’ll go crazy if you try to figure out short-term movements in the market, don’t you???

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