Word on Friday of the first U.S. payroll contraction in more than four years barely slowed the stock market's bullish rampage. Despite the grim news, which makes fools of those who still profess to see no recession, the Dow Industrials rose nearly a hundred points. We'd expected as much, since this is no ordinary rally, but rather a dead-cat bounce driven almost entirely by maniacal short-covering. In this respect, the buyers are as disconnected from the events of the real world as a lug nut, as rational in their thinking as a rabid dog. Not that they could have been unaware of the news -- that the work force had shriveled by 17,000 jobs last month. Of course they were. But it was a prayerful, desperate kind of awareness that asked, oh please, Lord, to punish any investor so stupid as to still be in stocks, even as the U.S. economy sinks into a 1930s-style deflation. Unfortunately for the bears, the heavens did not open up on Friday, nor did the trumpets sound, when the payroll news hit the tape. Instead, stocks merely sold off moderately, demonstrating once again the brain-dead solidarity of its institutional sponsors. Righteous Plunge Indeed, anyone looking for the Dow Industrials to plummet a righteous 3,000 points in the space of a few days must first explain why portfolio managers would dive out of equities simply because U.S. job rolls had contracted. Remember, for all intents and purposes these guys are Kudlow clones. Which is to say they probably view the payroll numbers as bullish -- evidence that employers are become leaner and therefore more profitable. Under the circumstances, it shouldn't be too difficult to predict how the stock market will react to more bad news in the coming days; for we need only ask ourselves:
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