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Equity Indices Plunge On Weak Employment Data

ByThe Pattern, Price & Time Report
AuthorJames Hyerczyk
Published 04/08/2012, 05:48 AM
Updated 05/14/2017, 06:45 AM
USD/JPY
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Equity markets and the U.S. Dollar traded lower after the government reported that the U.S. economy added only a 120,000 jobs in March. This was the smallest increase in five months, bringing an end to the recent string of strong gains. The number of jobs added last month was well below the pre-report estimates of a 210,000 increase. In addition, this marked the first time since November that the employment gains failed to top the 200,000 mark.

Immediately after the release of the data, equity markets broke sharply from their pre-report highs. Momentum was strong; however, thin trading conditions because of the observance of Good Friday may have exaggerated the move to the downside. By the end of the shortened trading session, the Dow was down triple digits. With the futures indices being offered into the close, traders are anticipating a follow-through break when trading resumes on Monday.

While stock traders were paring positions because of a weak outlook for the U.S. economy, the U.S. Dollar was falling as Treasury Bond and Note yields dropped to levels not seen in two weeks. The USD JPY Forex pair was hit especially hard as prices were down almost 1 percent.

Traders should be cautious about reading too much into Friday’s moves as most were taking place under holiday trading conditions. The reactions seem to be almost by the book except for the drop in the equity markets. With interest rates falling, the break in the Dollar was expected, but the sell-off in the equity markets is a bit of a surprise. After digesting the information over the week-end, investors may feel the same way, making this investment sector ripe for a reversal back to the upside.

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