The Dow Jones Industrial Average
Here is a quick look at how things are stacking up compared with last month.
|Expected jobs growth||100,000||100,000|
|Actual jobs growth||64,000||163,000|
So how is it that unemployment rose while we added so many jobs? One major cause is probably the nature of the reports. The unemployment figure comes from a household survey, which contrasts with the non-farm payroll figure that we get from the establishment survey. The former survey will include farmers, who have had a particularly difficult month because of the drought in the Midwest. Taking a look at Labor Department figures that strip out this statistic, you'd see that there was actually a net jobs gain for the month.
So on the surface it seems counterintuitive that the market would surge on a rising unemployment rate, but dig in a bit and you see that there is a method to the madness after all. As is the nature of big days like this, investors were treated to a big drop in the Volatility Index
It follows, then, that the more volatile stocks on the Dow, such as Hewlett-Packard
Fellow Fool Morgan Housel accurately noted that 80% of your returns come 20% of the time. The only problem is we never know that 20% will strike. Today is a perfect example. Had you told investors before the market open that the unemployment rate would have gone up after remaining stubbornly high and weighing on stocks for months, most of them would have expected the market to drop today. Instead, we were treated to the opposite.
And that's the nature of markets. They're rarely predictable, which is why we advocate tuning out the market babble on a daily basis and buying and holding great companies for the long run. It's a proven technique we've used to stomp the markets for years. You can get started doing the same today with The Motley Fool's Top Stock for 2012. It's our chief investment officer's highest-conviction stock for the next year, and it will probably be yours, too, after you read his report.