Analysis of the S&P 500 on Jobs Day

Today was an ugly day for equities and Treasurys were not the beneficiary.  But in preparation for the Employment Situation report tomorrow, I thought it would be good to become familiar with some history.  Of the 15 Employment Situation reports prior to last month (I’ve excluded April because the report was released on a day in which domestic equity markets were closed):

  • 7 saw down days in the SPX the day prior to the release
  • In 5 of those 7 instances, the SPX also finished lower on the day of the release
  • In 4 of those 5 instances, the SPX also closed lower the day following release
  • The average two day return–the day of the release & the day following–when the SPX closed lower on the day prior to the Employment Situation report is -1.42%
  • The highest two day return–the day of the release & the day following–when the SPX closed lower on the day prior to the Employment Situation report was +1.00%
  • The average two day return–the day of the release & the day following–for all 15 of those instances is -0.58%
  • The highest two day return–the day of the release & the day following–for all 15 of those instances was +1.42%
  • The lowest two day return–the day of the release & the day following–for all 15 of those instances was -6.72%
  • The day prior to the Employment Report released in May 2011 saw a drop of -0.91%
  • The two day return–the day of the release & the day following–for Employment Report released in May 2011 was 0.84%

I’ve sliced that small data set several different ways and here are some conclusions:

  • The return on the SPX is a partly a function of market conditions (as August and September of last year significantly reduced the average return above)
  • If the two day return (tomorrow and Monday) turns out to be positive, it is likely to be modest move
  • The price action for the first 5 months of 2011 and the first 3 months of 2012 was better than the other 7 months

It would be imprudent to make more specific conclusions as the data set is small, but more importantly, the price action is also a function of other circumstances.  Expectations for tomorrow’s report are set fairly low at this point and last month’s release (excluded from the data above) was a major catalyst in dropping the SPX below 1360 several days later.  If tomorrow’s release surpasses expectations, I think history will not be a useful guide and equities will shoot higher.  However, should the numbers come in-line or worse, I’m also not expecting the SPX to drop to its April lows.

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