The Bureau of Labor Statistics is set to release their latest employment report for June on Friday. Whether the report is outstanding, lousy or somewhere in between, it likely does not matter, as stocks seem to take on a life of their own on jobs day. For one thing we as investors have been conditioned to expect from the stock market on jobs Friday regardless of how the employment data looks, an initially poor market response followed by a renewed sense of enthusiasm throughout the remainder of the trading day.
No Matter The Weather
It has become an all too familiar response to the monthly employment report. On one hand, the number comes out in line or stronger than expected, and stock investors initially recoil at the notion that the U.S. Federal Reserve might move to raise interest rates sooner than expected. As a result, markets head measurably lower at the open. On the other hand, the employment number comes out weaker than expected, and stock investors head to the exits amid worries that the next economic slowdown is lurking right around the corner.
Using the most recent example to highlight this point, the latter was the tone coming out of the report from last month. Needless to say, the May jobs numbers reported back on June 3 were unequivocally lousy, as only +38,000 new jobs were added versus consensus expectations of +162,000 being added to U.S. payrolls. And for the first hour of trading, the results for the stock market were ugly. After having closed at 2,105 the previous day, the S&P 500 Index (NYSEARCA:SPY) fell by as much as -30 points, or more than -1% in the first hour of trading. In short, it looked like a rout was on.
But then the buyers started moving in. And for the remainder of the day, stocks entered into definitive rally mode. By just before 3PM that same day, stocks were within three S&P points of being flat for the day. And by the close, the S&P 500 Index ended down by only -6, which was less than -0.30% below the previous close. Not too shabby for an utterly lousy jobs day that raised sufficient doubts about the state of the economic recovery that it sent the skittish U.S. Federal Reserve running back to the hills on further interest rate hikes.
A Repeated Post Crisis Pattern On Jobs Friday
This pattern on jobs Friday has happened time and time again in the post crisis period. Once again, this pattern has been true regardless of whether the actual jobs number is a good one or not.
Overall, we have had a total of 84 monthly employment reports on days when the U.S. stock market was open for trading since the calming of the financial crisis back in March 2009 (in three April instances in 2010, 2012 and 2015, the market was closed for Good Friday when the employment report was released).
In 53 of these past instances, or nearly two-thirds of the time at 63%, the S&P 500 Index declined by -0.25% or more during the trading day versus its previous close. This includes 39 declines of -0.50% or more and 26 declines of -1% or more. In short, the market trades measurably lower two-thirds of the time on jobs Friday including drops of -1% or nearly half of these instances.
Yet in 47 of these same trading days, or well more than half of the time at 56%, the S&P 500 Index has ended higher for the day. And often stocks have reached higher levels along the way before the day is out. To this point, stocks have ended up trading higher in 68 instances along the way, or more than 81% of the time, on jobs Friday.
The Bottom Line
As we look ahead to the latest monthly employment report for June, don't get too caught up in the reported number and how it might impact the stock market that trading day. For regardless of whether the Bureau of Labor Statistics delivers a great report or a poor number to the market, stocks are bound to take a pause before eventually finding the silver lining in the report. And if the markets have an initially poor reaction to whatever the BLS reveals on Friday, the more nimble among us may view it as a potential opportunity to capitalize.
Disclosure: This article is for information purposes only. There are risks involved with investing including loss of principal. Gerring Capital Partners makes no explicit or implicit guarantee with respect to performance or the outcome of any investment or projections made. There is no guarantee that the goals of the strategies discussed by Gerring Capital Partners will be met.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.