U.S. jobs number disappoints but stocks rise on belief that bad news means the Fed is move likely to act next week

09/07/2012 1:53 pm EST


Jim Jubak

Founder and Editor, JubakPicks.com

Back to reality.

After a day yesterday when stocks soared around the world on promises that the European Central Bank would stand behind Italian and Spanish government bonds, today we’re back to the same old real world.

And the same old investment theory.

U.S. job growth for August was a disappointing 96,000. That’s below both the consensus of 130,000 jobs among economists surveyed by Briefing.com and the revised numbers for July showing growth of 141,000 jobs. The private sector added 103,000 jobs in August, down from 162,000 in July.

You might expect U.S. stocks to be down on the disappointment, but instead the Standard & Poor’s 500 Stock index is up slightly (0.25% as of 1:30 p.m. New York time today to 1435.75.

Traders have apparently decided to buy into the argument—again--that weak U.S. economic numbers mean the Federal Reserve is more likely to institute a third round of quantitative easing—or something--to stimulate the economy—when the Fed’s Open Market Committee meets on September 13.

I think that’s unlikely but positioning your portfolio to avoid/catch a potential Fed stimulus has been a winning strategy for the last month, so why change horses now?

It will be interesting to see how traders decide to re-position their portfolios after a Fed move—one way or the other—is off the table after Thursday. The Open Market Committee’s next meeting after next week isn’t until October 24.
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