How the Dow Went Schizo

How the Dow Went Schizo

Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.

It's been a bizarre summer for the market. Stocks have often moved opposite the way they normally would, rising with bad economic news, and falling with the good, as investors have feared that a brightening economy would persuade the Federal Reserve to cut its stimulus package sooner rather than later.

Today was perhaps a perfect example of this schizophrenia, as the Dow Jones Industrial Average , in response to an underwhelming jobs report, first fell 1%, then turned around and peaked with a gain of 0.5%, before ending the session down 15 points, or 0.1%. Clearly, the market has no idea what will come from the Fed's next meeting 10 days from now. For long-term investors, though, today's reaction is best ignored. Better to focus on the disappointing jobs numbers, and what that means for the overall economy,

The Department of Labor reported that 169,000 nonfarm payroll jobs were added in August, below expectations of 180,000. Worse, July job additions were revised down from 162,000, to 104,000, and June's figure was estimated to be 16,000 lower. The unemployment rate ticked down 0.1%, to 7.3%, but that was a result of fewer people looking for work rather than a significant gain in jobs, as the labor participation rate fell to its lowest point since 1978, at 63.2%.

While retiring baby boomers, by choice or not, may be part of the reason for the declining unemployment rate, the underemployment rate, which includes part-time workers who want full-time work, is over 13%. Economists estimate that the economy needs to be adding 300,000 jobs a month to bring the country to full employment, which seems a way's off after today's report.

Hewlett-Packard was the best performing Dow stock, up 1.4% on little company-specific news. The PC maker is one of the index's more volatile stocks, and has sunk 20% from its high a few weeks following a disappointing earnings report. Today, the PC-maker reported signing a $56-million contract over three years with the Defense Dept., which could've provided a bump, but that sum is small change for a company doing over $100 billion in annual revenue.

JPMorgan Chase also moved up 0.9%, as Johnson & Johnson has asked it to run the sale of its Ortho Clinical Diagnostics Unit, which could go for $5 billion, as it continues to bring in major business despite the slew of recent lawsuits. The Wall Street bank also announced its departure from the student loan business yesterday, which some analysts saw as a positive, as many fear a coming student loan bubble after years of high unemployment and ballooning student debt.

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