On Thursday, the Labor Department announced its most recent weekly jobless claims figure. Stocks surged initially on the news that initial filings for unemployment insurance fell by 27k to 451k. This figure beat expectations for 471k, and was down from last week’s 478k.

Shortly after the morning gain, stocks began to fade. By mid-afternoon, the S&P 500 dipped a bit below 1102, which was barely higher than its open of 1101.15.

In this news driven environment, traders have come to expect headlines to steer the day in the appropriate direction. By this logic, Thursday should have been another big day for the bulls. But it wasn’t.

Part of the intraday pullback in stocks had to do with Deutsche Bank’s (DB) announcement that it was raising capital (which the market took as a negative). However, a closer at the job claims report raised more than a few eyebrows and may have produced a sell program or two.

For starters, the net decline of 27k claims isn’t exact. Prior week claims were revised up 6,000, so the net decline from last week’s initial number is 21k, not 27k.

Second, the Labor Day holiday apparently affected the latest report. For the latest reporting week, nine states did not file claims data to the Labor Department because of federal holiday. This resulted in two states, California and Virginia, estimating their figures, while the other seven states’ data was estimated by the US Government.

It seems a bit fishy that the jobless claims report, which has been generally disappointing lately, comes in so strong near the beginning of mid-term election campaigns, and that the government was in charge of estimating data for seven states. (Conspiracy theorists will want to note that a Labor Department statistician ensured that the estimates’ impact on the figure was negligible. )

Democrats are facing a lot of pressure in the mid-term elections, and are expected to lose a fair amount of seats in Washington. The main focus this November is on the economy, so it’s natural that the Democrats would want the economy to gain some momentum (or at least appear to) before voters hit the polls.

The point of this little story isn’t to rag on the government or to uncover the shocking reasons behind the weak action on today’s good news. This situation tells me three things:

1) Mid-term election campaigns have begun. While politicians usually talk to make their respective party look good, it’s time to turn the data filter up to high.

2) When economic data is published, it is important to read into what the data is saying, not simply repeat the headline and assume the market will do the same.

3) It’s not the news; it’s how the market reacts. Today was a prime example.

 

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