The most ridiculous discussion item today is: “Why is the stock market down a little bit after the good jobs report?”
The only legitimate answer is: Who cares? 0.1% in either direction after a ridiculous rally in recent weeks is not something you obsess over.
Perhaps it’s possible that the good news is maybe making investors question whether QE3 will ever come, and perhaps that has some possibly negative effect, but we really have no idea.
That’s Bob Pisani’s explanation, who is describing the current market as a funhouse mirror (or something like that) where all traders are “gaming the fed.”
So traders think they’re gaming the Fed, which reeks of hubris, because the connection between Fed action and the stock market is tenuous.
Want to see a more robust explanation? Check out this chart (from a couple weeks ago) that plots stocks against Macro-economic surprises, as measured by Deutsche Bank. That’s a more robust explanation.
Photo: Surprise Index
The moment you think you’re “gaming the Fed” you get into trouble.
Just ask anyone who held 30-year Treasuries ahead of the QE2 announcement, but got crushed when the Fed decided to bid at the short end.