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Jobs Report: A Tale of Two Trades

NEW YORK ( TheStreet) -- Friday's monthly jobs report tells a tale of two trades.

In 2012, market observers used each of the Bureau of Labor Statistics's monthly employment reports to gain a pulse on the presidential election. If non-farm payrolls could grow at a steady pace, critics argued, it would provide President Obama the momentum he needed to win reelection on the back of a seemingly improving economy. Otherwise, it was Mitt Romney's race to seize. Ultimately, Obama cruised to a second term.

In 2013, the focus has shifted. Markets are on round-the-clock Federal Reserve watch. And the tale of two trades are obvious: participants who buy and sell based on the strengths or flaws of economic fundamentals, and those who buy and sell on whether those economic indicators will lead central bankers to scale back stimulus measures.

Look to Friday's market action following the jobs report to explain.

The S&P 500 popped at the opening bell as the 195,000 new payrolls added in June, the upwardly revised 195,000 added in May and the upwardly revised 199,000 added in April boosted the average monthly gain to 182,000 during the prior 12 months. Hourly wages increased 10 cents in June from May.

Good news, right?

Maybe. The S&P quickly relinquished its gains and slightly dipped into negative territory for a tick around 10:30 a.m. ET.

"In this bizarro world we're in, where good is bad and bad is good, we might see the Fed take their foot off the QE accelerator a little bit and maybe start buying less bonds sooner than the market had predicted," said Michael Serio, regional chief investment officer for Wells Fargo Private Bank.

That was the general feeling among analysts TheStreet interviewed Friday morning when the market headed lower after the upbeat opening.

Housing data, consumer confidence, labor statistics and a raft of other positive economic indicators generally have shown a stronger trend of improvement in recent months than at any other time during the recovery. But an improving trend hints that the Fed may finally have the wiggle room to draw down its monthly purchases of mortgage-back securities and longer-term Treasuries -- which is more generally understood as monetary stimulus.

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