The monthly jobs report was issued this morning and surprised analysts with a low +142 thousand jobs; virtually all of the analysts I heard and read were predicting another 200k+ announcement. The unemployment rate fell a tenth of a point to 6.1%. It is interesting to remember "the good ole days" when unemployment rates in the high five percent to low six percent range were considered normal; but we know this isn't a healthy, thriving economy. I have several friends who are still unemployed and many empty storefronts continue to be empty in my neighborhood. This latest tick down in the unemployment rate is the result of more Americans giving up their job search; so they don't "count", i.e., the labor force participation rate dropped again.
But the markets didn't blink. S&P futures were running around a negative $7 before the announcement and immediately began rising after the announcement. The S&P 500 index opened at $1998, yesterday's close, dropped to a low of $1990 for the first couple of hours, but then recovered and steadily rose all day and closed at its high for the day, $2008, up $10. How's that for a reaction to bad news? The Russell 2000 Index wasn't quite so positive, closing up $3 at $1170. Volatility fell off about a half point to 12.1%.
Trading volume was flat with 1.8 billion shares of the S&P 500 stocks trading. Trading dropped off 7% on the NYSE and declined 10% on NASDAQ. So we continue to see market gains on low trading volume. I interpret that as a sign of traders buying, but lacking conviction, so they only buy a few shares.
We continue to see a similar repeating pattern. When the market rises very much, traders get nervous and sell to preserve their gains. When the market pulls back, the bulls buy the dip. If this pattern continues, we could see a sideways choppy market for a few weeks. That could blow off much of the overbought steam in a very innocuous manner. On the other hand, one of these days, some bad news might actually be taken as bad news...
But let's forget about that for now and enjoy our weekend.
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