Economists expect to learn on Friday that the string of 200,000-plus nonfarm payroll gains is continuing. But one trader is warning that if the March jobs number comes in especially strong, the market could be in big trouble
"A really hot number could set this tape in motion to go a lot lower, mainly because it'll change perceptions" about when the Federal Reserve will raise the federal funds rate target, said David Seaburg, head of equity sales trading with Cowen & Co.
The Fed is finally getting closer to raising rates, with some expecting to see a rate hike rate as early as June, though that's becoming less of a consensus opinion. The future Fed move is expected to raise bond yields across the spectrum, making fixed income more attractive and consequently dampening demand for stocks.
And since the Fed's dual mandate is to maximize employment while maintaining price stability and to promote moderate long-term interest rates, a strong jobs number would persuade the Fed to move sooner rather than later, on balance, as it would show that the economy needs less stimulus.
The problem, as Seaburg sees it, is that investors really aren't prepared for such an outcome—perhaps because recent economic data, including Wednesday's ADP private sector payrolls number, have come in relatively weak.
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