No Taper Fears Today?
Color me a bit surprised by the reaction in the stock market to today's jobs report. What we have seen recently, and even yesterday, is that whenever we get strong economic data stocks sell off due to fears that the Fed will be pressured to taper sooner rather than later and that will hurt stocks.
So today when the November nonfarm payrolls report came out better than expected (203,000 jobs vs. expectations for 180k) I would have expected stocks to sell off at the open of trading. Moreover, the unemployment rate actually fell from 7.2% to 7.0%. More taper pressure, right?
And then we got the Univ of Mich. Consumer Sentiment survey which showed a big spike up to 82.5 from 75.1 in November. Surely that should cause a selloff in the bond market, rising bond yields, and pressure on stocks.
But an hour into trading the Dow is up more than 150 points and the 10-year yield is flat from yesterday's closing levels near 2.87%. What gives?
I think the best explanation is that investors are viewing today's jobs report as sort of a Goldilocks scenario. That is, the number of jobs added is enough to continue this modest economic recovery we have been mired in but not necessarily so strong that it would prompt the Fed to question their extreme accommodative monetary policy.
After all, some job growth is good and needed. It should help support wages, which boost consumer confidence and spending, which should lead to a renewed capex cycle and help boost corporate profits - all of which should continue to support stock prices. So that seems to be the temperature of investors today, at least in our view.