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Market Euphoria About Jobs Report Has Already Ebbed

"If I had to take my choice between stimulating the GDP by 0.5% or cutting it by 0.5%, at this moment, I would choose stimulus, but the point I'm emphasizing is we're talking about one half of 1%," said Benjamin Freidman, an economist at Harvard University who focuses on fiscal and monetary policy.

In normal times, after Congress had opted for fiscal tightening, the Fed would have likely counteracted that move by implementing monetary easing to soften the economic blow. But with interest rates near 0% and the central bank purchasing some $85 billion in Treasuries and mortgage backed securities, there's not much else it can do.

"That will not happen this time," said Friedman, who added that the small hit on GDP may not be worth a huge fight. "Making a huge thing of it is, in my estimate, not what we ought to be doing."

The president did reiterate the negative impacts to jobs that the sequester could have, but Republicans said Obama had overestimated the troubles. The U.S. equity markets largely appeared to ignore the sequester this week as the Dow surged to four straight record closing highs and the S&P tested multi-year highs of its own this week.

As the Dow, S&P and Nasdaq each gained more than 2% for the week, it begged the question as to whether the president played too much of his hand.

"Well, I think the president had a responsibility to tell the American people what to expect if Congress failed to do anything about the sequester and the arbitrary cuts to, essentially, every government program out there," said David Di Martino, a Democratic strategist in Washington D.C. "He never said that all the cuts would happen on day one, but he was trying to let people know that there are serious consequences for Congress' failure to act."

The equity markets backed off a bit from the session highs and precious metals popped into positive territory -- signals that traders weren't as impressed by the surprise as the February numbers initially printed.

One analyst suggested that this worry of a dark cloud in the jobs report details may not be a terrible thing for investors.

"Future stock returns are higher when you buy stocks during a time of higher unemployment than lower -- no different than when you buy a lower P/E versus a higher P/E," said Lee Munson, chief investment officer of Portfolio, LLC. "So if you buy stock when unemployment is under 4% and everything is good, you're not going to have as good a performance, historically, than if you buy when things are awful and more people are unemployed."

The BLS reported that in February there were 12 million unemployed. The Dow on Friday set an intraday record high of $14,413.17.

-- Written by Joe Deaux in New York.

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