Expect a Surprise in Friday’s Jobs Report

Lately we’ve been discussing how even good news fails to drive the market. But Friday’s jobs report has the potential to catch the market completely off guard. Most market participants are expecting another dismal report and the unemployment rate to perhaps pass the long anticipated 10% threshold. But if Monday’s ISM report is any indication there may be a shock coming.

The manufacturing index posted its third consecutive reading over 50, which is the dividing line between expansion and contraction. The index was much stronger than expected, coming in at 55.7, the highest reading since well before the recession.

But of greater interest to us is the employment sub-index. It crossed the 50 threshold for the first time in over a year, posting a reading of 53.1. This is an early indication that the jobs report will not be as bad as feared, and in the current market environment “not as bad” could be a catalyst for a countertrend rally.

Of course there is the matter of a Fed meeting on Wednesday that has the potential to move the market as well, but if the market is oversold and looks ominous at the close on Thursday buying some calls ahead of Friday’s jobs report might yield a quick, low risk profit.