There was optimism and pessimism ahead of the government jobs number on Friday, but the number was not that great. In fact, it was pretty bad. Expectations were for 248,000 new jobs in March, so the paltry 126,000 we saw in Friday’s report was disappointing to say the least. Last month’s strong jobs report had sort of given the Fed a “green light” to raise interest rates, but March’s number raises many new questions for the Fed. The idea of a June rate hike is likely off the table, and oddly enough, the stock market will probably love this news when it reopens on Monday.
There was actually a lot of hope as we closed out trading on Thursday, as weekly jobless claims fell to 268,000 from the previous week’s 288,000. That was the lowest level we had seen in 15 years, and it was supposed to bode well for Friday’s non-farm payroll report. The problem with the March number is that it was so far below expectations. If you were Janet Yellen, you would have to really think long and hard about pushing for an interest rate hike anytime soon. Throw in all of the recent economic numbers that have been “so-so,” and you would have to think that interest rate hikes are clearly not needed for quite a while.
We are seeing the classic “bad-news-is-good-news” scenario right now, and with Friday’s employment news, the stock market would likely have rallied in a big way. The problem with bad news being good news is that it means the economy might really not be all that great. Economic news across the board has been showing weakness, and Friday’s jobs number reinforced the thought that the economy might really is faltering a bit. This again raises questions about a possible global GDP slowdown, and that, as we all recall, was the big worry that kicked in last October.
The stock market could react in either direction next week. In some ways, the bad jobs number could rally stocks in a big way as investors conclude that rate hikes are off the table for June or even for September. On the other hand, investors might feel that something is not quite right in the U.S. economy or the global economy, and we could see the stock market head lower. The ongoing strength in U.S. dollar will likely weigh on corporate earnings, which are coming out in the weeks ahead, which is another “wild card” for investors to digest.
With the stock market closed on Friday, we were unable to get a quick reading of sentiment, so that makes for an interesting Monday reaction. The Dow and the S&P 500 are pretty much flat for the quarter and the year thus far, so Monday’s reaction to Friday’s disappointing jobs number will be very telling as to where the stock market might be headed in the second quarter. Even more telling will be the Federal Reserve’s comments and reaction as it sends its various “Fed Heads” out to speak and comment on the state of interest rates and the broader economy.
That said, the Gorilla wishes each and all a happy holiday weekend. The Final Four of the March Madness meet Saturday to find the Final Two for Monday night. It has been a riveting tournament, and may the best team win! Again, have a great weekend and we will be back in action Monday for what promises to be an exciting week for the financial markets.
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