STANDING conventional stock market wisdom on its head, investors may wish for weaker-than-expected employment numbers on Friday.
A strong jobs report could prompt an early end to the Federal Reserve’s policy of pumping money into the banking system to rescue the economy and set off the stock market’s long-awaited pullback.
The Fed’s loose monetary policy since the end of 2008 has kept interest rates low and propelled stocks to record highs.
Last week, stocks fell and bond yields surged after Fed chairman Ben Bernanke said the US central bank may decide to taper its stimulus programmes in the next few policy meetings if data shows the economy is gaining traction.
Stocks posted their second straight week of losses on Friday, mostly on fears that the Fed would curb its bond-buying programme sooner than most people expected.
The market has managed to climb this year without any substantial pullback. Concerns about the Fed’s next move have increased speculation that a major bout of selling is ahead.
Economists say job gains of at least 200,000 per month over several months are needed to significantly reduce high unemployment.
The Fed has said it will keep interest rates at historic lows until the US unemployment rate drops to 6.5 per cent.
Employers are expected to have added 168,000 jobs to their payrolls in May, according to economists. That is slightly above April’s count of 165,000 new positions. The US unemployment rate is expected to hold steady at 7.5 per cent in May.
Analysts said better-than-expected jobs data would be evidence of strength in the economy, so any pullback could be short-lived.