Buy the rumor, sell the news, or in this case sell the rumor, buy the news, is wise market advice born from time-tested trading experience. The market often prices in change before it occurs. Then, when it does occur, the market surprises the herd by moving in the opposite direction than was expected.
(Stocks in article: NYSE: ABK, NYSE: C, NYSE: GFI, Nasdaq: GNCMA, Nasdaq: MRVL, NYSE: NSM, NYSE: EJ, NYSE: VE, Nasdaq: EBIX, Nasdaq: APPX, AMEX: DIA, AMEX: SPY, Nasdaq: QQQQ)
The Employment Situation Report was nearly as bad as the worst end of the expectation range. The consensus of economists was forecasting an increase of 25,000 jobs in February, but we received news of 63,000 jobs lost in the month. In an interesting aside, unemployment measured 4.8%, against expectations for 5.0%. Still, the tone of the report was inarguably negative, and the implications it offers to GDP are concerning.
On top of that news, the RBC Cash Index offered a reading of 33.1 for March, a record low. This compared with measures of 48.5 in February and 56.3 in January. The index measures consumer attitudes and spending by household, so it offers good reason to be less confident in our economic future. A component of the index, the RBC Expectations Index, which measures confidence in future economic conditions, read -41.6, compared to -7.0 in February. The RBC Investment Index, which measures confidence in stock and real estate investment, measured 56.7, down from 62.6.
What we take out of this report is further evidence that while Americans consider their current economic situation troubling, and even see the future outlook bleak, they still see a chance for stock market rise. By now, most investors understand that the stock market is a leading indicator over the long-term. Also, we must not miss the fact that the market has already discounted recession, in our view. So, is bad news good news now? Have we sold the rumor, and should we buy the news? This is a topic we will cover over the weekend, so be sure to return and catch "The Greek's Week Ahead."
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