r/stocks
I don't understand why the market dropped so much after Friday's jobs report. Despite the headline results, NFP was clearly not that hot
Author argues market overreacted to NFP data by pricing in rate hikes, ignoring that job gains were solely part-time while full-time roles declined.
- Market mispriced the quality of job growth by focusing on headline numbers rather than the decline in full-time employment.
- Fed rate hike odds surged disproportionately despite weak underlying labor market fundamentals.
- Persistent inflation and high oil prices remain unaddressed risks that justify caution despite the author's skepticism.
So the leading theory for why the stock market fell so much last Friday was because a hot jobs report led to a substantial increase in Fed rate hike odds. NFP reported 172K job additions vs 80K expected.
However, it barely takes any digging to see that all of the job gains came from part time jobs: Part time jobs were up 230K while full time jobs were actually down 80K. Any random person can tell it's not a healthy job market, never mind sophisticated traders with all the information in the world available to them.
Yet, the market treated the NFP results as though they were a massive beat. Federal rate hike odds for the year increased from 40% to 70% once NFP released. I don't understand the reaction. I know there are other factors that are concerning such as high oil/inflation, but a strong jobs market really doesn't seem like one of them.
How did sophisticated stock and bond traders come to the conclusion that the jobs market is flourishing and that as a result, rate hikes are imminent?
Market does what the market does.
It’s a big spoiled pet
Is cute how you guys think there’s a single reason like that to live the market.
It’s profit taking kids. Happens all the time
When profit taking happens on an institutional level they all jump in immediately to sell at the highest they can. This causes a cascading effect
Correct
bruh spy went up for a month straight what do you expect
I mean...is it that much of a drop when shit was running up 100 - 200% in the last 3-6 months?
You're right that some context is missing. The market dropped on the Friday
NFP number (172K jobs vs 80K expected) because all the gains were part-time
work — full-time jobs actually declined. Markets read that as "low quality
beat" and sold off. But as you said, the broader context is we're still up
big from the 2022 lows. A 3-5% pullback after a 60%+ run is just normal
volatility. The panic happens when people forget that drawdowns are part of
every bull market.
I saw it as people exiting/profit taking after Ath on many position and didn't bat an eye. Also people are exiting market before SpaceX IPO.
I agree, 172K is not exciting. The MSM has short memories, nothing else they want to talk about and estimates that were much lower. They could also talk about stagflation.
I could actually process the reaction if the 172K gains were mostly composed of full time jobs.
The surge in rate hikes odds is confusing because these gains were all part time.
It’s a mistake to look for reasons why a market goes up or down on a given day. Sometimes there is a clear reason, but most of the time it is way less straightforward. You have 100+ million people trading with their own individual reasons, you have algos and quants and market makers, you have institutional investors with their own agendas, you have options expirations sometimes, etc. there’s just too much in the mix to explain easily. The news wants bite size explanations but that’s just not how it works. Most of the time, the news is just looking backwards and trying to make sense of what happened but it’s nonsense
the market was looking for an excuse to pull back. between AVGO's iffy numbers (which were from software, not infrastructure, and didn't give an AI warning when digging in) to the jobs - it was a headline driven move (much like it always is)
i think that they (institutional investors) are all just waiting until they think the other guys (other institutional investors) are going to cash out and take profits. That coupled with a few other things triggered it:
- The whole AI investment scheme is a bubble. (but one that we expect to continue for at least another 1 - 2 years)
- Jobs report - I agree its a lot of fuss over a 1/4 point increase that may or may not happen in the fall
- They saw the reaction to the Broadcom Earning report
- The Korean Stock market was down (like 8%?) that same morning and SK Hynix and Samsung were both down a lot.
- The war in Iran is sliding backwards
- Oil is going up.
- The inflation report (CPI will be released this week (Wed or Thurs, I forget) but we already know they will be bad
- They want cash on hand for Friday's SpaceX IPO.
I hear this and yet I also have no evidence this is true