Yesterday the Dow rose 203 points on news about employment. A “mere” 512,000 more Americans lost their jobs last week, the 51st consecutive week that weekly job loses exceeded 500,000, This number nonetheless not only beat analyst expectations, it was a bit lower than some previous months job loses. It thus convinced traders that today’s non-farm jobs report for October would show that “only” 150,000 more people were collecting unemployment insurance last month and the official unemployment rate would come in at 9.9 percent.
Today’s employment report came in much worse than expected. Some 190,000 rather than the projected 150,000 more Americans joined unemployment lines. The official unemployment rate of 9.8 percent rose to 10.2 percent.
Did stock prices plunge on the news? No. They actually rose a bit. The reason is that some brokerage houses today awarded upgrades to a few large companies. In other words, one kind of analyst expectation (related to employment) caused he market to soar yesterday, and another kind (related to guesses about future earnings) offset a very scary jobs number with enormous potential negative implications for the economy.
Is there any lesson here for people investing their own money in the stock market? You betcha. Basing stock market investments on real numbers or real trends of any kind today is a total waste of time. The current secret of market success involves surfing the exuberant wave of happy talk and guesswork where the news is always good if the obvious is disdained and the worrisome ignored.