This morning, business news pundits were lamenting that the market was closed on Friday, when the upbeat unemployment data for March was released. You may recall that it reported 162,000 new jobs were added to the U.S. economy last month. Of course, that news hasn't changed over the weekend, but now the market has had time to digest the information, rather than quickly react to it. As a result, the Dow was up by about 26 points in the first half hour of trading. Yet some investing and business gurus were complaining that the market would have got a bigger bump had it been open on Friday. They shouldn't be.
To wish for a quick, gut reaction instead of a calm, reflected-upon decision calls for irrational behavior. If the market would have gone up more initially than it did after investors had some additional time to actually think about the new information, then the additional bump would have been purely brainless exuberance. Market participants should applaud rational action, not yearn for stock prices to rise only to eventually fall when people realize the fundamentals don't support the gain.
If the market is really rational, then any amount by which the market would have gone up on Friday would have just been shed in the days that followed. And if investors and traders became too cynical about the employment data over the weekend, and the market didn't rise as much as it should have, then it will in the days that follow instead. Either way, the timing of when the market is open or closed shouldn't ultimately matter.
If you think about what expectations were for Friday's unemployment report, then the complaint about losing a big bump seems even stranger. The data, while largely positive, actually failed to meet expectations -- the market believed the report would reflect 190,000 new jobs. Anyone who works in the equity market will tell you that it's expectations that matter. Stock prices reflect market expectation, not fundamentals. Even if a million jobs had been created, the market wouldn't rise if it expected two million: it would fall.
Any enormous bump in the stock market on Friday in response to the jobs data would have been irrationally driven. Equities have already rallied over the past year, even though the labor market continues to struggle. It has already figured in a recovery -- possibly even a steeper recovery than we'll actually see. A little restrained behavior on the part of investors due to fully digesting an economic report isn't a bad thing.