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Strong Jobs Report Could Put Kibosh On Rally

According to Joe Terranova there's chatter on the Street that suggests a strong jobs number could actually be bad for stocks.

Right now non-farm payrolls are forecast to come in unchanged on Friday, according to Reuters data, with private payrolls are expected to add 75,000.

If we get an upside surprise, we may be in trouble.

How’s that possible?

We know, it doesn’t make sense on the surface. After all a stronger jobs number signals a stronger economy, right? And that’s bullish.

But Terranova tells us another factor is at play – and in the short term it probably wields more influence over market action.

We’re talking about the dollar.

Lately the dollar and the S&P have been trading inversely. In other words as the dollar goes down stocks go up. But a stronger than expected jobs report could put a floor under the dollar.

That’s because if we get a strong positive private sector jobs report the Fed could interpret it as a sign the economy is on the mend. In turn, that could put a ceiling on the amount of QE2 stimulus that the Fed is willing to consider.

If that’s the scenario, ”you have to ask yourself how much QE2 is already priced in,” says Terranova on the Halftime Report. “I think it’s $500 billion” and in the event of a strong jobs report we probably won’t get more than that.

”In turn that could stall the dollar’s decline,” Terranova says. No more dollar decline is a problem for the S&P.

But don’t run for the sell button just yet. We’re talking about how the market may react to an upside surprise -- and by most accounts that’s unlikely.

According to the latest ADP Employer Services report, private employers cut 39,000 jobs in September. That was the largest monthly loss since January and a disappointment to analysts who had forecast 24,000 private payroll additions.

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Nonetheless it’s an interesting theory Do you buy it? Tell us what you think!





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Trader disclosure: On Oct. 7, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Terranova Owns (APA), (AAPL), (IBM), (EOG), (HES), (OIH), (OXY), (ORCL), (RSH), (UPL), (SU), (VRTS), (XBI), (RIG), (VRTS), (FTO), (PEP), (JOYG), (C); Terranova Is Long (GLD) Puts; Terranova Is Long (FCX) Puts; Terranova Is Long (JOYG) Puts; Terranova Is Long (OIH) Puts; Terranova Is Long (FFIV) Puts; Karen Finerman owns (JCG); Karen Finerman owns (GYMB); Karen Finerman owns (AEO); Karen Finerman is short (ANF); Karen Finerman's firm is long (BP); Karen Finerman's firm is long (YUM); Karen Finerman's firm is long (GENZ); Karen Finerman's firm is long S&P 500 Puts; Karen Finerman's firm is long Russel 2000 Puts; Karen Finerman's firm is short (JR); Karen Finerman's firm is short (MDY); Karen Finerman's firm is short (IWM); Karen Finerman's firm is short (SPY); Cortes Is Short (XLF); Cortes Is Short (BAC); Cortes Is Short (BIDU); Cortes Is Short Euro; Cortes Is Short Mexican Peso; Cortes Is Long German Bonds; Pete Najarian is long (AA) Calls; Pete Najarian is long (MAR) Calls; Pete Najarian is long (YUM) Calls; Pete Najarian is long (AKAM) Calls; Pete Najarian is long (BP) Calls; Pete Najarian is long (BEXP) Calls; Pete Najarian owns (BRCD); Jon Najarian Owns (BKE); Jon Najarian Owns (ZUMZ); Jon Najarian Owns (ADBE), Is long (ADBE) Call Spreads; Jon Najarian Owns (DCTH), Is long (DCTH) Call Spreads; Jon Najarian Owns (ANF), Is Short (ANF) Calls; Jon Najarian Owns (LTD), Is Short (LTD) Calls; Jon Najarian Owns (AEO), Is Short (AEO) Calls; Jon Najarian Owns (AA) Call Spreads; Jon Najarian Owns (SVNT) Call Spreads; Jon Najarian Owns (BEXP) Calls; Jon Najarian Owns (JCP) Calls

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