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‘Sell the news’ - why the job report will give Wall Street another excuse to unload stocks

Stocks are groping for direction on Wednesday after Automatic Data Processing Inc. said 175,000 jobs were added to the U.S. private sector in January. The figure was just shy of analyst estimates. Attention now turns to Friday morning’s release of the much anticipated non-farm payrolls report. Analysts are officially looking for 190k jobs created in January, but according to Mark Lehman of JMP Securities, what Wall Street really seeks are reasons to justify more selling.

Lehmann explains his thinking in the attached clip. “The market is finding excuses to go down just like it found excuses to go up last year and this is just another example.”

The Dow (^DJI) has lost roughly 7% so far in 2014 and has dropped eight of the past eleven days. The stated catalysts have been uninspiring profit outlooks from corporate America and weakness overseas. Though those headwinds are certainly playing a part, what really seems to be bothering traders is that the market has been powering ahead largely on the basis of momentum for months. There hasn’t been an official correction since August of 2011 and the anniversary of the 2009 low is just one month away. With stocks having doubled over the last 5 years it’s getting harder to find reasons to step in and buy stocks aggressively.

The S&P500 (^GSPC) would enter official “correction” territory on a drop below 1,665. With major retailers set to report their results for the holiday quarter over the next few weeks, there are likely to be plenty more excuses to sell coming at us soon. For those with cash on the sidelines already staying patient and finding select buying opportunities is the prudent course.

Lehmann is more optimistic than the bears, though he’s hardly pounding the table. “The relative valuations of the overall market are fine,” he shrugs, concluding that he still thinks “the U.S. equity markets are the best place to put your money in the global investing world.”

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