The end of this week has an important number for all stock market investors. The payroll numbers are released for non-farm jobs. Could this be the number that sends stocks tumbling after such a huge run up since the election or is this what will catapult it higher still?
Which way will it move? That’s a good question, and one that has many people speculating. A good number for payrolls will gives lots of encouragement for the Fed to raise interest rates again. Friday will most likely be the most important day of the week.
What type of payroll numbers do we want to see?
I think most of us will want to see a positive jobs number on Friday. Actually, you can say that it’s necessary for the economy to keep moving in the right direction. If you want this rally to keep moving then you want a good number on Friday.
During the great recession almost a decade old now, you could say that the market did not really want to see an increase in jobs payroll because that meant that the Feds were going to keep interest rates low. Keeping interest rates now could have the opposite effect on a recovering market. We want the labor force to be doing well so that we can get rate hikes to keep the economy churning.
Financials looking with hawk eyes at the labor numbers
The financial sector will be watching with anticipation for the new payroll numbers this Friday. They’ve been on a tear the past few months in part because they anticipate rate hikes from the Feds. IF we see some scary numbers that spook the Feds from raising rates then we will likely see a pullback in financials.
If the Fed doesn’t show confidence with a rate hike then the opposite of confidence in the market would be implied. Maybe it means they know something that is going on in the economy that we don’t know about yet. I’d much rather get a good jobs number and a rate hike that would likely keep the market happy.
If we get a bad number for jobs then I’d expect some red in the market across the board with financials leading the way. It seems that there is more downside risk than there is upside potential at this point, but I wouldn’t put a rally with some great jobs numbers out of the equation quite yet. If jobs are flat then I’d expect that to be negative news. Good numbers and a rate hike is what the market has already priced in and the market won’t be happy if it doesn’t get what it wants.