Will Friday's Jobs Report Save Stocks? Pros Weigh In

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Will Friday's Jobs Report Save Stocks? Pros Weigh In

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Published: Thursday, 6 Jun 2013 | 7:51 AM ET

By: Matthew J. Belvedere | Producer, CNBC's "Squawk Box"

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Will the Dow Jones Industrial Average log its first three-day losing streak of the year?

With Wednesday's 200-plus-point drop coupled with Tuesday's decline, the blue-chip index has lost nearly 300 points in the past two sessions on Federal Reserve taper concerns. That was the biggest two-day drop since November.

The Dow industrial average stood under the key 15,000 level prior to Thursday's trading—having fallen 3.7 percent since achieving a record intraday high on May 22. The S&P 500 hit its record the same day, and has dropped 4.6 percent since then. That index stood just above 1,600.

Investors are looking ahead to Friday's employment report for more signs of whether the economy is ready for the Fed to start thinking about scaling back its $85 billion a month bond-buying program. Economists expect an increase of 169,000 in non-farm payrolls, with an unchanged jobless rate of 7.5 percent.

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Leading market experts and economists interviewed on CNBC's "Squawk Box" on Thursday offered their predictions on the Fed, the economy, and stocks.

Dow Closes Below 15,000

Jim O'Sullivan, High Frequency Economics, and Jonathan Golub, UBS Investment Research, discuss how taper talk and economic concerns sparked yesterday's broad sell-off in the markets.

Jonathan Golub, chief US equity strategist at UBS Investment Research:

With a year-end target of 1,425 on the S&P 500, Golub said, "I think that a lot of strategists every time the market moves adjust and I kind of put an anchor out there. Stocks are going to continue to come back a bit. The next two, three, four months we're going to see some continued economic weakness."

"The Fed is intentionally confusing the markets, perhaps, setting up for a pullout later on and I think it's causing a little caution here," he added. "The Fed, on one hand, they're saying we could go up or down [on quantitative easing]. On the other hand, they're saying we think we need to taper. I think it's a way for them to manage an exit later on."

Jim O'Sullivan, chief U.S. economist at High Frequency Economics:

"The economy is doing OK, it's not great. It's a battle between fiscal drag and monetary stimulus…and the more [the Fed] keeps pushing, [they'll] ultimately win this battle. Arguably when you look at the labor market and the downturn in the unemployment rate, the Fed is winning. It's a long battle of the unemployment rate is legitimately coming down."

O'Sullivan added, "I clipped a little bit [Wednesday] after the employment part of ISM as well as ADP to 150,000, which still wouldn't be a bad number but not quite as good as we've seen. So far this year, the trend has been 196,000 per month. [The] six month average is over 200,000. The numbers have been quite good. Certainly more than enough over time to bring down unemployment. But the risk is Friday is a little worse."

Investing in a World of Cheap Money

Paul Reilly, Raymond James Financial, provides his views on how to invest in fixed income amid a low interest rate environment.

Paul Reilly, chief executive officer at Raymond James Financial:

"The average investor can't take principal losses. It's just not a good time to be long in lower credit fixed income," he said. "As [interest] rates go up, and they will some day, there's too much chance of principal loss."

"The Fed got to come out some time and we got to address the deficit some time. So it's going to impact the markets," Reilly said.

"If you're still young and earning, you should have more in equities. If you're more toward retirement, you move more toward fixed income," Reilly said. "And you have to look long-term. Everybody is worried about what happens to the market this week. You have to say, 'Where is the market going in the next year.'"

Darrell Cronk, regional chief investment officer at Wells Fargo Private Bank:

"I think [Friday's jobs] number will come in a little below consensus," he said. "This is probably one of the most important jobs numbers of the year as far as the market's focus on it."

"Anything less than 200,000 jobs, the market probably responds favorably because it keeps the Fed on the table, which I think is what the market is looking for," Cronk said. "Certainly anything down around the 100,000 number then would be kind of a stalling effect in the economy."