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Pro Traders: Jobs Report Will Have to Thread a Tight Needle

Thursday, 1 Sep 2011 | 6:19 PM ET

Wall Street's four-day rally ground to a halt on Thursday as investors turned cautious ahead of a key labor market report expected to underscore fears the economy is headed for another recession.

According to Reuters, the jobs report is expected to show a gain of 75,000 jobs in August, slowing from July’s 117,000 rise. The unemployment rate is expected to remain steady at 9.1 percent.

But Goldman Sachs forecast was even more dismal. It slashed its jobs forecast to 25,000 from 50,000 Thursday.

“It’s a real tight needle that we have to thread tomorrow. It’s almost like a reverse Goldilocks,” Fast trader Brian Kelly said. “The number can’t be too good because then we won’t get QE3—that’s what the market’s been betting on—but it can’t be too bad because if it’s really that bad, what are you going to do?”

Goldman Sachs’ Andrew Tilton told the Fast team the reason for halving their forecast was based on a number of factors, including the job advertising index, ADP job report and ISM Manufacturing Index—all of which suggested weaker employment growth.

“Even though jobless claims have been pretty low, suggesting that layoffs haven’t really picked up” he said, “it seems like hiring has been fading recently.”

While Tilton agreed with Kelly’s assessment that on the margin a weaker jobs report increases the odds of more Fed action, he said he’d take good job growth any day of the week.

Trader Guy Adami thinks unless there is some good news, the S&P will head south by this time next week.

“If they can pull a rabbit out of the hat tomorrow maybe we spike through and the momentum carries us higher," he said. “If the President can say something, anything, constructive maybe we do. Otherwise I fear we’re heading back down to that 1100 and change level.”

Adami was referring to President Obama’s big jobs speech set for next Thursday. The proposals could include programs to fund infrastructure building, measures to help struggling homeowners, and tax breaks to encourage hiring of new workers.

Either way, Adami said, the S&P is not staying where it currently is, because technically it’s done everything it should do.

Pete Najarian agrees. He said the volatility index, now at around 32 percent, it’s telling us “the market expects to continually see some very, very big broad moves.”

Volatility Playbook: SPY
Brian Stutland, of Stutland Equities, shares his ETF [SPY] trade.



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Trader disclosure: On September 1, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Jon Najarian is long (AAPL) call spreads; Jon Najarian is long (JBL) call spreads; Jon Najarian is long (GLD) call spreads; Jon Najarian is long (FNSR) call spreads; Jon Najarian is long (CLWR); Jon Najarian is long (CCI); Jon Najarian is long (CIGX); Adami Owns (AGU); Adami Owns (C); Adami Owns (GS); Adami Owns (INTC); Adami Owns (MSFT); Adami Owns (NUE); Adami Owns (BTU); Pete Najarian owns (AAPL);’ Pete Najarian owns (C); Pete Najarian owns (HPQ); Pete Najarian owns (MS); Weiss owns (AAPL); Weiss owns (COP); Weiss owns (JPM); Weiss owns (QCOM); Weiss owns (DVN); Weiss owns (VZ); Weiss owns (TWM); Weiss owns (SDS); Weiss is short (X); Weiss owns (BTU)

For Brian Kelly
Accounts managed by Brian Kelly Capital own (TLT) options
Accounts managed by Brian Kelly Capital own (JJG) options
Accounts managed by Brian Kelly Capital are short (FXE) via options
Accounts managed by Brian Kelly Capital are short (SLV)
Accounts managed by Brian Kelly Capital are short (JJC)

Brian Stutland
Stutland Equities is a market maker holding positions in (VIX) futures and options and (VXX) stock and options
Stutland Equities holds hedged option positions in (SPX) and (SPY)

Carter Worth
**No disclosures

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