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Barrons / Biz - Money

Bummer! Dow Drops 40 Points as Markets Count Down to Payrolls, Budget

The Dow fell, the Nasdaq rose, and the S&P 500 went nowhere. Maybe Friday's payrolls will shake things up.
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Stocks finished mixed today as investor continue to try to sort out the implications of tax reform and the recent market rotation as Friday's payrolls report looms.

The S&P 500 finished little changed at 2629.27 today, while the Dow Jones Industrial Average fell 39.73 points, or 0.2%, to 24,140.91. The Nasdaq Composite rose 0.2% to 6776.38.

It might be tempting to use the pause in the market to load up on stocks, but Todd Market Forecast isn't ready to get bullish just yet:

Stocks meandered on Wednesday in a seemingly confused manner. We liked the fact that the high techs and the NASDAQ showed signs of life but the listed market couldn't get out of its own way. Breadth was still not encouraging and the put call ratio remains low. Given the seasonality, it's tempting to put on a trading position, but let's hold off for now...The NASDAQ Composite is just curling up from an oversold condition. This has a decent chance of projecting further strength. If this market rallies, it's unlikely that the Dow and S&P 500 will sit around.

The "pre-existing gloom" could be exacerbated by Friday's payrolls report, says Rafiki Capital's Steven Englander. He explains why:

We expect employment to disappoint on Friday, see risks that the UR will edge up and lean to the soft side of the 0.2-0.3% m/m hourly earnings increase range....Employment growth has been declining steadily over the last year. The hurricanes distorted a couple of months' reading but the outcome is likely to be quite a bit weaker than consensus expectations close to 200k...Disappointing numbers in the current risk off mood will probably add to the gloom. The outcomes would not change our long term optimism on activity, but Friday morning could be a bummer.

Friday also marks the day that a budget deal has to be reached or the government will shut down. To which we say: Double bummer.

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