Still Positive on Equities after Unemployment Data

The S&P 500 was down 3% yesterday largely in reaction to the release of ADP's unemployment number. ADP estimates that the US non-farm economy shed 693 thousand jobs during the month of December. The data on ADP's website only goes back to December 2000, but this was the worst monthly decline in that time period. I also looked at the data from the Bureau of Labor Statistics covering the same time frame. Of note, the US non-farm economy started shedding jobs in December of 2007 (one year ago). If we assume the BLS number coming on Friday is the same as the ADP number, the US will have shed 2.829 million jobs since December 2007. That is equivalent to all the job gains over the preceding 23 months. I am just trying to frame the magnitude of current news flow.

Here is the link to the ADP Employment Report: http://www.adpemploymentreport.com/

Also yesterday, oil futures for February delivery dropped 12% on news that the inventory of oil rose more than expected. I don't think anyone attributes the rise to a sudden increase in production. The implication here is that demand for oil is weaker than expected given the economic recession.

Horrible unemployment data plus signals from the oil market that the economy is very weak only pushed the market down 3% yesterday.

One of the hardest questions to answer as an investor is "What is priced in?" This is even a hard question in retrospect, but consider the context again. The S&P 500 hit a low on November 20th and was up 24% before yesterdays "sell off" of 3%. Even shorter term, the S&P 500 was up 7% since Christmas Eve.

Yesterday's market gave me even more conviction that I need to be buying equities on the dips. The worst jobs number in over nine years only shaved 3% off the market that has been moving higher. I will also point out that in an earlier post I mentioned I would try to buy when the market is 5% of a recent high. So yesterday's move doesn't even qualify as a short-term entry point in my opinion.