The stock market can be like a puzzle sometimes. Today is a perfect example of this. Why is the stock market up today after diving this morning on an unexpectedly hot jobs report?
To understand what’s going on, investors need to consider what the market thinks and fears. Through that lens, today’s gyrations in the S&P 500 and other major stock indexes might not seem rational, but at least they’ll be more understandable.
Here’s Why the Stock Market Is Up Today
Among the data points released by the Bureau of Labor Statistics this morning, you might be tempted to focus on the August unemployment rate. It was 3.8%, above the economists’ consensus estimate of 3.7% and the same as August’s 3.8% unemployment rate.
Yet, that’s not what today’s stock traders are mainly focusing on. Rather, they’re talking about the September nonfarm payroll additions, which totaled 336,000. That figure is nearly twice the consensus estimate of 170,000 nonfarm payroll additions.
In response, the S&P 500 and other major stock market indexes plunged into the red. However, the S&P 500 soon reversed course and was up 1.2% by 2:00 p.m. Eastern.
Evidently, fears of a near-term interest rate hike were overtaken by the market’s relief that an economic recession may be averted. Wells Fargo senior economist Tim Quinlan provides insight into what today’s traders may have been thinking:
“A year ago there was a general consensus among economists and financial markets that a recession was in the offing. . . Those forecasts have largely been pared, put-off or canceled altogether. To some extent the rationale for these more sanguine assessments is a recognition of the uncanny staying power of the consumer.”
Indeed, “sanguine” would be the right word to describe today’s large-cap stock traders. So, going forward, what does this mean for investors?
What You Can Do
If many people have jobs and employers are hiring, then the U.S. consumer can remain strong for the foreseeable future. Still, it’s too early to assume that there won’t be a recession in 2024.
Consequently, investors should continue to be on the lookout for new data releases concerning the economy. You can’t control what the Federal Reserve does, but at least you can control your self-education and your investing strategy.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
