The State of the Markets
Monday, December 9, 2013
To be sure, the game has become a bit confusing of late. For example, one minute the “good news is bad news” theme is the driver to the action and the next, well, not so much. And for those investors counting on the mainstream media to help them understand why the market is doing what it doing currently, there may be a complete lack of clarity on why stocks first declined for five straight days only to reverse nearly all of the losses in 4 minutes on Friday’s opening bell.
So, let’s see if we can clear things up.
Earlier in the week, the “good news is bad news” theme clearly prevailed. Upside surprises from high-profile manufacturing (PMI and ISM), housing and auto sector data drove speculation that the door may still be open for a “Dectaper.” As such, stocks would decline after each new piece of stronger-than expected economic data came in.
This thought process appeared to have set up the market for a big move in response to the all-important jobs report. The thinking was that if the jobs report came in strong, stocks would decline due to the idea that the Fed would have further proof that it was time to start tapering the QE bond-buying program.
The Numbers Were Strong
So, when the Bureau of Labor Statistics reported that Nonfarm Payrolls increased by 203,000 in November (the second consecutive monthly reading over 200K) and the Unemployment Rate had taken a dive down to 7.0% (from 7.3% in October), one couldn’t be blamed for thinking that the stock market was going to decline in earnest at the open.
But, that most certainly was NOT the case. Here’s why…
David Moenning is the founder and chief investment strategist for StateoftheMarkets.com, a website dedicated to investor education and portfolio analysis. Mr. Moenning is also President of Heritage Capital Management, a privately owned, investment management firm. Founded in 1989, Heritage is focuses on risk management and an “own the best and ignore the rest” equity selection strategy.
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Positions in stocks mentioned: none
The opinions and forecasts expressed are those of David Moenning, President of Heritage Capital Management (HCM) and may not actually come to pass. Mr. Moenning’s opinions and viewpoints regarding the future of the markets should not be construed as recommendations of any specific security or Heritage Capital program. No part of this material is intended as an investment recommendation. Neither the information nor any opinion expressed constitutes a solicitation to purchase or sell securities or any of HCM’s programs. Do NOT ever purchase any security without doing sufficient research. There is no guarantee that investment objectives outlined will actually come to pass. Investors should consult an Investment Professional before investing in any investment program. Neither Mr. Moenning or Heritage Capital Management nor any of their employees shall have any liability for any loss sustained by anyone who has relied on the information contained herein. Mr. Moenning and employees of HCM may at times have positions in the securities referred to and may make purchases or sales of these securities while this publication is in circulation. The analysis contained is based on both technical and fundamental research. Although the information contained is derived from sources which are believed to be reliable, they cannot be guaranteed.