Dow Falls on Strong Economic Reports

Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.

The Dow Jones Industrial Average (DJINDICES: ^DJI  ) is down after multiple positive reports on the jobs and housing market. As of 1:30 p.m. EST the Dow was down 30 points, to 15,884. The S&P 500 (SNPINDEX: ^GSPC  ) was down four points, to 1,791.

The market is in a strange time where good news for the economy is bad news for the market, as any indication that the economy is better than expected raises the likelihood that the Fed will taper its asset purchases sooner than expected. There were four U.S. economic releases today.





ADP Private Sector Employment




Trade deficit


$40.6 billion

$43.0 billion

ISM nonmanufacturing




New home sales




The two to pay attention to are the employment report, and the new home sales data. ADP reported its private sector employment report, which showed that the private sector added 215,000 jobs in November, better than analyst expectations of 178,000 jobs added. The company also revised upwards its October report from 130,000 jobs added to 184,000. The Department of Labor's employment report comes out Friday.

ADP Change in Nonfarm Payrolls Chart

ADP Change in Nonfarm Payrolls data by YCharts

The headline number of 215,000 jobs added looks great, but will be revised next month. This report tells us nothing new. The economy continues to steadily add jobs,

The other positive economic report was the new home sales report, which included both September and October, a result of the government shutdown delaying the report. In September, new home sales were 354,000, and then rose to a seasonally adjusted annual rate of 444,000. Analysts had expected a rise to 418,000, as new home prices are generally lower in winter months as demand falls.

The positive news sent bond prices down and rates up as investors fear that the Fed will end its asset purchases sooner than investors previously expected. The yield on the 10-year treasury is up 58 basis points, to 2.841%, and the rate on the 30-year fixed mortgage rose to 4.43%. The chart is only updated to yesterday for the Treasury rate, and Friday for the mortgage rate, but you get the idea.

10 Year Treasury Rate Chart

10 Year Treasury Rate data by YCharts

The Dow is being held up by financials today as they are some of the largest stocks on the Dow. Financials directly benefit from the widening spread between short-term and long-term rates that the fear of tapering is causing. The Federal Reserve's zero interest-rate policy means financials can borrow money at low rates and lend out that money at higher long-term rates.

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9/29/2016 4:35 PM
^DJI $18143.45 Down -195.79 -1.07%
^GSPC $2151.13 Down -20.24 -0.93%
S&P 500 INDEX CAPS Rating: No stars