Why stocks rose after jobs disappointment

Traders have apparently decided to buy into the argument -- again -- that weak U.S. economic numbers mean more quantitative easing.

By Jim J. Jubak Sep 7, 2012 6:37PM
Dice on newspaper stock pages © Tom Grill, PhotographerBack to reality.

After a day Thursday when stocks soared on promises that the European Central Bank would stand behind Italian and Spanish government bonds, Friday 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 Index ($INX) rose less than 1%.

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 Sept. 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 Oct. 24.

At the time of this writing, Jim Jubak didn't own shares of any companies mentioned in this post in personal portfolios. The mutual fund he manages, Jubak Global Equity Fund (JUBAX), may or may not own positions in any stock mentioned. For a full list of the stocks in the fund as of the end of the most recent quarter, see the fund's portfolio here. 
Sep 7, 2012 9:17PM

Stocks are all traded,at least by the big firms, via computer with logarithm programs. The hedges that occur currently are based on the possibility of QE3 coming down the pike. Folks are getting positioned for gold{which will go up with a QE3}or grabbing prime stocks which have proven to go up during past easing attempts.

 For all its intent and pupose QE is worthless. Printing your own currency to make more fiat to buy your own bonds is complete disaster in the making. But it will show a short term increase in the market and give a false impression of an improving economy, which the current president of the US will want.

Sep 7, 2012 8:28PM

"or something to stimulate the economy, when the Fed’s Open Market Committee meets on Sept. 13."


Great.  The only problem is that stimulus does NOTHING to make a company create a job or hire a person.   However, the traders are correct that it does boost stock prices.   And that is ALL it does.

Sep 7, 2012 9:21PM
As a former autoworker and current manufacturer, I have zero confidence the party of cap and trade can create 100 manufacturing jobs, let alone "create 1 million manufacturing jobs."

Sep 8, 2012 12:32AM
While i'm usually a non fan of Cramer, for a change he actually hit the nail on the head. The wall street whores are waiting for their next "fix" and like most addicts they can't hardly wait and get very ecstatic about the promise of the next fix .
Sep 8, 2012 3:53AM
‎2008 66.2 66.0 66.1 65.9 66.1 66.1 66.1 66.1 65.9 66.0 65.8 65.8
2009 65.7 65.8 65.6 65.6 65.7 65.7 65.5 65.4 65.1 65.0 65.0 64.6
2010 64.8 64.9 64.9 65.1 64.9 64.6 64.6 64.7 64.6 64.4 64.5 64.3
2011 64.2 64.2 64.2 64.2 64.2 64.1 64.0 64.1 64.1 64.1 64.0 64.0
2012 63.7 63.9 63.8 63.6 63.8 63.8 63.7 63.5
Labor participation rate now stands at an all time low since the administration took office, and all the media tells us Americans are getting back to work. I guess I don't understand how the when unemployment went down .2%, the labor participation rate went down .2%. I guess in an Obamaconomy you can have it both ways. After all when you're doing such a poor job you have to lie about a lot of things.
Sep 7, 2012 8:24PM
Stocks went up on pure HFT low volume ramping.  The entire gain for the day was pumped from 3:59 until market close at 4:00...that's right, in ONE MINUTE.  Not only that, it was done on the lowest volume of the day AND month.  This one minute ramp was done by a High Frequency Trading computer out of a big bailed out bank.  You want truth folk?...stick with me.
Sep 7, 2012 11:45PM

The Obama campaign, moving FORWARD at a snails pace, and burning taxpayers dollars all the way!



Sep 7, 2012 8:44PM
Jobs number wouldn't disappoint if fools would stop putting out high forecasts.
Sep 8, 2012 3:48AM

Old Airplane Driver- Are you another recovering "smoker" from the 60's. I'm sure you were flying. Is that the basis for your nickname. There is limted hiring in the USA because we live in a global economy.  Nationally we have a idiot occupying the white house scaring Business off with taxes and regulations.

Obama was  a Senator for six months. He never had a job in the private sector. As a lawyer  his claim to fame  (Obama vs citibank )(look that one up on the net).

Obamcare is a disaster with massive  tax increases. So why be in the USA?  To have a commie like Obama redistribute to the druggies, 25 million illegal/invaders and those that have been sitting on there lazy butts. LEt's not forget Sandra Flukes 7 dollars worth of birth control. This guy is worse then Jimmy Carter. That's why job growth is heading toward zero.

Sep 7, 2012 8:19PM
Obamas speech was just that.  An Obama speech.  No better, no worse.
Sep 7, 2012 11:52PM

They expected 1% of the 12 Million to be employed, they got 0.75%.........


At this rate Obama will be at 6% unemployment just in time for his daughters to enter the work force!


LMFAO!  Obama begging for more time is like a crack addict begging for another rock!  "I promise it will be better if you can just give me one more"

Sep 8, 2012 6:49AM

for those who  belive that  any movement  the last  3   years  has anything to do  with true economic  value  has just   bought  the farm of  the  obama  lie  machine.   

so  much stimulus money  but  so little to show  for it   and  het  no  one  works.  Great  way to fo forward ?????????????????

  wise up   lefties,  obama  is  still  an  acorn   punk  from  chicago


Sep 8, 2012 1:42PM

Yesterday I rec'd a letter informing me that my electric company would apply for a 4.6% increase . Who do I send a letter to for an increase of 4.6% ?  I get it now , Santa !

Sep 8, 2012 12:14PM
Why can't MSN do a better job of filtering spam out of comments? And Microsoft wonders why it loses market share to Google, Apple, etc. If you want to be taken seriously as a technology company you better fix your technology.
Sep 8, 2012 1:55PM
Bad jobs numbers means downward wage pressure.  Publically-traded companies love bad jobs numbers.  The stock market is booming while the average wage has decresed 7.4% since Obama took office.  Big O and the democrats serve big govt and big business and to hell with small business and the average man.
Sep 8, 2012 12:54PM
Stocks rose because we're going to print more money and buying stocks is one way to get some.
Sep 8, 2012 1:08PM
Maybe they like the fact unemployment stays high so they can get away with paying less and cutting benefits and the employees can be made to work harder and still won't change jobs.
Sep 8, 2012 1:02PM
Outsourcing, automation, overworking a down size work force bad for the worker but can mean less expenses and more profits for business & stock holders.

Sep 8, 2012 12:26AM
It should'nt be too surprising that we had a low number. After all, we are in an election year, so why the heck would A company hire someone without knowing what policies/agenda's are going to be in place, or attempted in the very near future. Once Nov. is through, and we have a decision as to what the shape of our government will be than we will see jobs growth, regardless of who wins. Regardless of who wins, the markets will have security with that known, the fiscal cliff is the then next talked about issue. Which most likely will be a lot of posturing with markets taking the brunt of the attack, then poof all resolved and we go screaming. Or reality on an over priced market will hit (even though most P/E's are in a nice range) and we see much lower markets. Either way, lets hope for A Green Bay Packers Super bowl visit this year.
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