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Market’s First Big Test, Friday


Friday could be D-Day for the markets. The highly anticipated December jobs report comes out and by all accounts it should move the market.

As you probably know by now the estimates have gone from bad to worse. We put some numbers together so you could get a better idea.

Jobs Lost in December

500,000 – market consensus
693,000 - ADP
750,000 – ING

The U.S. economy shed jobs every month in 2008, according to government figures, and the pace picked up in October after the financial crisis intensified following the failure of Lehman Brothers in September.

Tomorrow's Trade: Jobs

“The adjustments we’ll see will probably be very scary but (the pain) will probably end more quickly,” says Tony Crescenzi, chief bond market strategist at Miller Tabak. That's because he thinks there’s more “preparedness” in our economy, than in eras past.

“(But) the numbers will probably be bad for a while,” he adds. And Crescenzi isn’t the only one who's expecting the cuts to continue for some months to come. In fact, some economists now fear that job cuts might be taking its toll on a former pillar of strength – small business.

"More and more of these firms are in survival mode. They kept thinking consumers will make it, but then December rolls around and sales are still not going anywhere -- in fact they're going down -- and finally (small businesses) run out of money," says William Dunkelberg, chief economist for the National Federation of Independent Business.

The spike in job cuts at small companies is particularly worrisome for the U.S. economy because these firms are the biggest source of non-government employment. If they are starting to ramp up the job cuts, that could mean the worst is still to come for the labor market.

Is there a trade here?

I’d look at Apollo Group , says Guy Adami. When people are out of jobs they go back to school.

There probably isn’t a trade to be had here because jobs data is a lagging indicator, counters Pete Najarian.

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Trader disclosure: On Jan. 8th, 2008, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Macke Owns (POT), (WMT), (TM), (MGM); Adami Owns (AGU), (BTU), (C), (GS), (INTC), (MSFT), (NUE); Najarian Owns (CSCO), (FCX), (MSFT), (ELN); Najarian Owns (XME) Calls, (NVLS) Calls, (NVDA) Calls; Najarian Owns (FCX) Short Calls; Najarian Owns (EEM) Long Call Spread ; Najarian Owns (ERTS) Long Call Spread; Najarian Owns (MSFT) Short Calls; Seymour Owns (AA), (BAC), (EEM), (F), (TSO); Seymour's Firm Owns (VIP)