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Profit from the Pros By Kevin Matras Executive Vice President
Stocks Pull Back After Historic Winning Streak, Await Today's Employment Report
Image: Bigstock
Stocks closed mostly lower yesterday giving up early gains with the S&P and Nasdaq snapping a 4-day winning streak. But for perspective, the markets also just finished their best 50-day rally ever!
News that Congress passed the revised Paycheck Protection Program (PPP), giving businesses more flexibility and time to use those loans, helped underpin the market earlier in the day.
Stocks were also buoyed by reports that the European Central Bank (ECB) will increase their bond purchases by an additional 600 billion euros ($627 billion dollars). This comes on top of their March announcement for the purchase of 750 billion euros worth of bonds. Many also believe that the ECB will have to up that number again later in the year.
But profit taking and position squaring set in by the close, ahead of this morning's Employment Situation report. Everybody's expecting an ugly number. So nobody should be shocked when we get it. Estimates are calling for another -7.725 million jobs lost (that's on top of the -20.500 million jobs we lost in the last report), and a 19.8% unemployment rate.
But it's important to remember that the report is a snapshot of a point in time that we are rapidly moving away from.
The worst of the pandemic is over. Every state has already opened up their economy in some shape or form, with more expansions being announced virtually every day. Businesses and consumers are starting to get back to some sense of normal. And people are spending money again in ways that they literally couldn't just a few short weeks/months ago.
Today's jobs report, regardless of how terrible it looks, will likely be the worst it will ever be as it relates to this crisis. Quite frankly, it will probably be the worst it will ever be – ever! So whatever it is, it's going to be history in the making. And then it will be over. Because the conditions that fostered those numbers are already gone. And the U.S. is open for business once again.
There's no telling how the market will act on any given day for any piece of news.
But it's clear the market is forward looking, and has turned its attention to the positive news of our economic recovery, and forecasts for an unprecedented 3rd quarter GDP, followed by another gangbusters 4th quarter.
That's why stocks have soared. And why it looks like there's a lot more upside to go.
So make sure you're taking full advantage of it.
Best,
Kevin Matras
Executive Vice President, Zacks Investment Research
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