Wall Street's Not-So-Great Expectations

December saw the loss of over 500,000 jobs, yet the market all but shrugged. Why? Because Wall Street saw it coming, Cramer said during Friday’s Mad Money. There was no need to overreact.

The market’s moves forecast what will happen in the economy six months from now. That means expectations were low as far back as June, and stocks traded accordingly. The bad news was already baked in, and that’s why a horrible jobs number cost the Dow only 143 points instead of 500.

The same thing happened with Alcoa and Intel . Both companies recently reported terrible quarterly earnings, but the stocks held their ground. And why shouldn’t they? Alcoa had already plunged 65% in the last year, while Intel had dropped 38%. By the time the conference calls came around, the negativity had been priced in.

Now just because Wall Street’s bearish predictions are coming true, slowly putting this bad news behind us, that doesn’t mean there’s good news ahead. That’s why the market held steady for most of Friday, Cramer said, before losing 80 additional points in the last 10 minutes.

The only jolt to the system will come from some number or event that exists outside Wall Street’s expectations. Three straight months of stabilizing jobs reports would probably be enough to surprise the Street, motivating buyers to re-enter the market. And, of course, a double-digit unemployment rate – it’s at 7.2% now – would send traders in the opposite direction.

But in the meantime, Cramer said, don’t expect much from the market when the economy does nothing more and nothing less than what was expected.





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