Bad News, Good Day: Why a Weak Jobs Report Sent Stocks Up
The economy lost 23,000 jobs in July. Wall Street threw a party. The S&P 500 closed at a record 7,757, the Nasdaq jumped about 1.3%, and NQ futures ran up roughly 1.2% on the day.
If that makes no sense to you, good. It means you are paying attention. A shrinking job market should scare investors. Instead, it thrilled them. So why did stocks rip on obviously bad news?
The answer is the single most useful thing a new trader can learn about how markets actually work. It is not the number that moves price. It is what the number does to the Fed.
Wait, the economy shrank and stocks went up?
Let's set the table. Economists expected around 83,000 new jobs in July. Instead, payrolls fell by 23,000, and prior months were revised down hard. On the surface, that is a soft labor market flashing a warning.
The day before, futures markets put the odds of a September rate hike near 55%. Within minutes of the report, those odds collapsed toward zero. Traders decided the Fed now has cover to leave...