Why You Can’t Get Your Market News From The Headlines Alone

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Second time in a week, folks.  When you get your news, make sure that you read more than the headline.

Flashback 7 days.  The Non-Farm Payrolls report hits the wire screaming "Jobs Report Falls Flat at 51,000 -- Analysts Expected 125,000". 

Pop quiz, Hotshot: What do you do?

If you were like the other headline-reading traders, you quickly bought bonds because you thought yields were about to drive down.  You made money, too --  for about 20 seconds.

Once the other traders read the rest of the report, it showed that the jobs report was actually pretty strong.  They sold bonds and your gains vanished.  And then some.

The headline, it appears, wasn't telling the whole story.

Flash forward to this morning. 

The Retail Sales report was set to release and markets want if consumers are still spending with vigor.  Traders know that the Fed watches Retail Sales for inflationary pressures on the economy.  Abundant spending is a signal that inflation could creep.

When the headline hit the newswires, it reads "Retail Sales Fall 0.4%, Well Short of Analysts' Expectation of a 0.2% Gain".  What do you do?

If you were like the other headline-reading traders, you quickly bought bonds because you thought that yields were about to dive down.  Less spending means fewer inflationary pressures.  You made money, too --  for about 20 seconds.

Once the other traders read the rest of the report, it showed that falling gas prices was the major contributor to the drop.  Excluding gasoline, Retail Sales acually registered a 0.6% gain -- creaming analysts estimates.  Mortgage bonds reversed.  The headline wasn't telling the whole story.

American consumers are quite predictable, at times.

As expected, mortgage rates are running higher today and have all but erased the gains of the last three weeks.