Strong Jobs Report Sends Dow Falling on Fed Worries

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  ) gave back yesterday's rise as better-than-expected jobs numbers for November and December have analysts worried about an increased taper from the Federal Reserve. As of 1:30 p.m., EST the Dow was down 78 points to 16,453. The S&P 500 (SNPINDEX: ^GSPC  ) was down one point to 1,836.

There was one U.S. economic release today.





ADP Private Sector Employment




ADP's National Employment Report showed the private sector added 238,000 jobs in December. That is above economists' expectation of a 215,000 gain, which was the previously estimated gain in November. November's private-sector employment data, though, was updated to 239,000 jobs added.

ADP Change in Nonfarm Payrolls Chart

ADP Change in Nonfarm Payrolls data by YCharts.

The Department of Labor is scheduled on Friday to release its nonfarm payrolls report, which includes both private and public-sector jobs. While the jobs numbers bounce around the long term story is unchanged -- the U.S. economy is steadily improving and continues to add about 200,000 jobs a month.

Some investors are worried that the strengthening job market brings us closer to the Fed further tapering its now-$75 billion monthly asset purchases and its reinvestment of proceeds. We will likely receive more information at 2 p.m. EST today when the Federal Open Market Committee releases the minutes from its December meeting. The fear is that the minutes will reveal far more hawkishness on the part of various members, or perhaps other surprises.

That said, investors should note that between the December and January meetings there is a rotation of commitee members. Leaving are three economic doves -- Chicago Fed chief Charles Evans, Boston Fed chief Eric Rosengren, and Kansas City chief Esther George -- as well as one hawk, St. Louis Fed chief James Bullard. Coming in are two Fed hawks -- Charles Plosser of Philadelphia and Richard Fisher of Dallas -- and two doves -- Narayana Kocherlakota of Minneapolis and Sandra Pianalto of Cleveland.

While four voting spots are changing hands, doves will still far outweigh hawks on the 12-person committee. We can expect that Fed policy of pumping money into the economy will remain unchanged even with the $10 billion monthly symbolic taper.

What's an investor to do?
I continue to believe the stock market is overvalued and that earnings look cyclically high. That said, predicting where the broad market will go in the short term is a game for fools (with a lowercase "F"). Stocks can always get more overvalued. When things get frothy, it's worthwhile to build up some cash on the side for when prices inevitably fall.

The Motley Fool has always taught that Foolish (capital "F") investors don't invest in the broad market. We invest in great companies at good prices, continue to educate ourselves, and hold on to our great companies over the long term. The market will fluctuate (sometimes massively), but great companies will win out over the long run.

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Dan Dzombak

Dan Dzombak has written for The Motley Fool since 2008. He covers value investing, investing process, and success among other things. You can follow him on Facebook or Twitter by clicking the buttons below or head over to his blog at

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