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Investing Specialists

Employment Report Fails to Pass the Sniff Test

But the economy is not all roses, either.

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This week, equity markets were remarkably calm, taking a dismal employment report in stride and still managing to show a 0.6% gain for the S&P 500. I suppose part of that neutral reaction to the jobs report was due to high hopes that just maybe the U.S. Federal Reserve's tapering program might be slowed, or even halted. At least, that's what the bond market seemed to think as the yield on the 10-year U.S. Treasury bond dropped from about 3% last week to 2.87% this week.

Given the Fed's Open Market minutes released earlier in the week, which expressed a lot of concern about the bond-buying program, I am not so sure that assumption is correct. I don't think the poor economic news is enough to cause a wholesale reversal of the tapering program. In other words, we might be stuck with a modestly weaker economy and a less generous Fed all at the same time--not a good prospect.

Robert Johnson, CFA does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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