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Bad expectations can be good Add to ...

Stocks have shown remarkable resilience on Friday morning, with the Dow Jones industrial average even poking into positive territory briefly, after a disastrous U.S. payrolls report set up the market for big losses at the start of trading. One explanation is that the bad news on payrolls had largely been built into stock prices during the Thursday selloff.

A note from Bespoke Investment Group backs up this impression. Bespoke conducted a poll among readers and found that they were bracing themselves for the worst on Friday. A consensus of economists had been forecasting a loss of 175,000 jobs in September, 73 per cent of readers polled thought that the losses would be higher.

"With so much negativity heading into the 8:30 a.m. (ET) release, an inline or even moderately worse than expected report might not be met with as much selling pressure as some might believe," Bespoke concluded.

Meanwhile, FT Alphaville put a lot of emphasis on the Goldman Sachs revision to its payrolls estimate on Thursday. Previously, economists at Goldman Sachs had been expecting the payrolls report would show a drop of 200,000 jobs, which was only slightly worse than the consensus expectation. However, in the afternoon, the economists scratched out that number and replaced it with an estimate of 250,000 losses.

Some observers have linked this revision to the stock market's late-day sell-off on Thursday - and still others raised the usual conspiracy theories regarding Goldman Sachs.

"How on Earth did Goldman know to increase its NFP estimates by 25 per cent less than 24 hours ago, to a number so much more aligned with reality: does Jan Hatzius have a direct, unrecorded line to a BLS 'janitor'?" said a blogger at Zero Hedge . "Or does he just like keeping his clients in suspense until the 11th hour on what the truth really is? Inquiring minds want to know."

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