Expected employment growth to raise market price of stocks

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After rallying for the most of February to reach record highs late in the month, the S&P 500 stock indez fell sharply on Friday March 6 following news that the economy added 295,000 jobs, bringing the unemployment rate down to 5.5%. An analyst has been expecting job growth closer to 235,000.

a) Why would you typically expect faster than expected employment growth to raise the market price of stocks? Explain your answer in a few sentences.

b) Why do you think stocks fell over 1% on the news instead? Explain in a few sentences.

Reference no: EM13743387

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