What the Markets Want

Here’s why the market reaction was underwhelming:

The unemployment rate drop to 7.7 percent along with 236,000 new jobs renewed chatter that the Federal Reserve might call an early end to its liquidity party and what that would mean for the five-year bull market run.

So instead of a major rally, Wall Street saw tepid buying, likely held back by the guessing game of how much longer the central bank will keep printing money if the economy continues showing improvement.

The markets want a big jobs number, but without much of a fall in the headline unemployment rate.  Instead they’d like to see people coming back into the labor force.  Why?  Because the big jobs number means a growing economy, and the longer unemployment stays above 6.5% the longer the Fed refrains from further tightening.