Sometimes, Wall Street simply chooses to ignore good news. That was the case yesterday as the ADP National Employment Report estimated that 297,000 jobs were created, which was nearly triple of expectations. Another report showed that non-manufacturing expanded rapidly and at the fastest clip since 2006.
The markets sold off early but clawed back and managed a modest but steady climb above the unchanged line.
While the ADP report is a precursor to Friday’s unemployment and payroll numbers, it does not always translate into an exact match. Maybe that’s why the market reaction was more or less muted. Other reasons could have been the stronger dollar, and lagging energy and precious metals. More importantly, stocks are getting pricey with the S&P; now having moved some 11% above its 200-day average, which begs the question as to how much higher we can go without a meaningful correction.
As much as the Fed’s QE-2 program was cheered as a plan to stimulate the economy, fears are now surfacing that this program may we cut back if it appears that its need is no longer as crucial as it appeared a few months ago.
Right now, all eyes are on Friday’s jobs report which offers hope that job gains may have fared better than previously anticipated. Of course, with the major indexes hovering at these lofty levels, perfect jobs numbers may already have been priced in.