By Richard Russell
Surprisingly bullish news came out about employment. The market’s reaction was that the economy is improving and that the Fed will raise rates. The market’s first reaction to unexpected news is often the wrong reaction. On the bullish employment news, money poured into the US dollar and Treasury bonds got hit hard. Historically, the first increase in rates is not bearish for the stock market. Therefore, the big drop in the market today may have been the wrong reaction.
A follow through on the downside on Monday would be bearish. But investors, thinking the situation through over the weekend, might take the bullish employment news as just plain bullish for the US economy. We are now dealing not only with the economy, but what the Fed will do next. The days when the market’s function was to discount future events in the economy have given way to investors attempting to psychoanalyze ... Log in or subscribe to continue reading.