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The Spokesman-Review Newspaper
Spokane, Washington  Est. May 19, 1883

Job Report Sets Stage For Sell-Off Stock Market’s Response Delayed By Good Friday Holiday

Associated Press

Pity Wall Street’s stock traders, who let no good news go unpunished.

A choice bit of economic data Friday, word that the economy created 140,000 jobs in March, seemed a perfect excuse to sell with abandon. The prior jobs report, which showed huge employment gains in February, triggered a massive bout of selling. This time, though, it was not to be.

The stock market was closed for Good Friday.

“They are probably itching and they probably can’t enjoy themselves over the holidays because come Monday there could be a significant sell-off,” said Sung Won Sohn, chief economist at Norwest Corp., a big bank.

“The stock traders,” he continued, “they’re going to have indigestion over Easter dinner.”

There’s good reason to believe the jobs data will be viewed as bad news. Treasury bond prices tumbled during an abridged trading session Friday, with the government’s benchmark 30-year bond losing $18.44 for each $1,000 invested.

Its yield, which is linked to much long-term consumer borrowing, rose to 6.82 percent from 6.67 percent Thursday. Yields rise when prices fall.

A bond market drubbing went hand-in-hand with the stock market’s March 8 sell-off in reaction to the February employment report. That day, the Dow Jones industrial average fell 171 points, the third-worst drop in points ever for the market’s most widely watched index.

To understand that event and the concern about stock prices on Monday, it’s necessary to think like a Wall Street trader.

First, job creation that exceeds expectations is bad news for interest rates as it could convince the Federal Reserve the economy is strengthening and in no need of further interest-rate reductions.

Second, a strengthening economy can generate increased inflation, a particular bugaboo for the Fed. Signs of higher inflation will generally stop the central bank from cutting rates, known in Fed-speak as “easing” as opposed to “tightening,” which means raising rates.

Hopes for fast-falling rates were shattered on March 8 with the unexpected news that 705,000 jobs were created in February.

Stock traders haven’t been entirely comfortable since then.

“It dips into the pattern of nervousness,” said A. Michael Lipper, president of Lipper Analytical Services Corp., a research firm. “Absent anything else, you should have selling on Monday.”

xxxx Markets closed U.S. financial markets were closed on Good Friday. Stock listings are weekly summaries, based on Thursday’s close.