Market Offers Clear Response to Huge Employment Revision
Investors were faced with a huge downward revision on employment numbers, raising the possibility of an anxious market.
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The primary issue facing investors on Tuesday was whether a huge downward revision of employment numbers would cause concern. They answered with a resounding "No!"
There was a brief dip in the trading action after news was released that the number of jobs created in the year that ended in March 2025 was revised down by 911,000. That means the economy produced less than half the jobs previously reported and wiped out 1.5 million jobs that were claimed under the Biden administration. However, after just a few minutes of contemplation, the buyers stepped in and drove the market steadily higher the rest of the day.
The jobs revision was well-anticipated and was seen as just another justification for a dovish Federal Reserve, which is what the bulls want more than anything else.
The action picked up in the final minutes of trading, and at the closing bell, the senior indices were in the green while small caps lagged. Breadth was poor due to the small cap weakness at around 2,200 gainers to 3,100 losers. The Magnificent Seven led with a gain of 0.7% although Apple AAPL dropped 1.75% as it was hit by a "sell the news" reaction to its new product news. It is now filling the gap on the chart that was created when it jumped on the Alphabet GOOGL antitrust news.
The hot group of the day was data centers, which I highlighted in my column here.
What is most interesting about the huge employment revision is that it makes it extremely clear that the Fed should have cut interest rates already. The Fed is behind the curve, and now it needs to do something to catch up. A series of interest rate cuts is coming, and investors still see that as a positive. The Fed deserves some blame for not working harder to have better data, but that is the nature of government bureaucracy.
What is frustrating the bears at this point is that the market has been ramping higher on anticipation of a dovish Fed for a while, and still doesn’t seem to have fully discounted the impact of rate cuts. The fact that the economy is much worse than thought doesn’t seem to be a problem since the Fed is riding to the rescue.
On Wednesday and Thursday, the PPI and CPI reports will hit, so there will be some talk about inflation, but this concern seems to have disappeared recently. The reports are likely to have little impact unless they are extremely hot, but few economists see that happening.
The trading action is a bit choppy, but what continues to be most impressive about the action is the pockets of speculative strength. Today, it was data centers, and there was a very long list of 10% movers despite weakness in the Russell 2000.
Stock picking is still the winning approach while the big-picture bears continue to whine about the indices.
Have a good evening. I’ll see you tomorrow.
At the time of publication, DePorre had no positions in any securities mentioned.
