Is a dismal jobs report already baked into stock prices?

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Wall Street may have been front-running itself in Wednesday’s sell-off.

Since September, the market has fallen sharply each Thursday before the government’s monthly report on employment trends, which always is issued on a Friday. The December report is due tomorrow.

So it’s possible that some investors and traders on Wednesday were clearing out ahead of today’s trading, anticipating another slide, said Ryan Detrick, senior technical analyst at Schaeffer’s Investment Research in Cincinnati. The Standard & Poor’s 500 index slumped 3%, its biggest drop since Dec. 1.

The December report is expected to be awful: The consensus forecast of economists surveyed by Bloomberg News is for a drop of 510,000 non-farm jobs.

The sell-off on Wednesday was fueled in part by a private firm’s estimate that 693,000 jobs were lost last month. Automatic Data Processing issues its estimate each month in advance of the government’s data.

The ADP estimate often has been way off, in both directions, compared with the government’s number. Most recently, ADP has been too optimistic.

For example, the firm had estimated that 250,000 jobs were lost in November; the government put the figure at 533,000.

ADP’s estimate for October was 179,000; the government reported a loss of 240,000, later revised to 320,000.

So on Wednesday, some investors may have feared that ADP, with its giant figure of 693,000, was again underestimating the government’s number. Or, they might have figured that ADP got it right: The firm said it had revised its methodology and that its data now should more closely track the government’s report (although ADP still doesn’t include government-agency hiring or firing in its number).

The stock market in recent weeks has largely brushed off depressing economic data, but the mood changed Wednesday. Downbeat financial reports from Time Warner, Intel Corp. and Alcoa Inc. didn’t help.

If the pattern of the last two months continues, however, the market will already have discounted the government’s report by the time it’s released on Friday: The S&P 500 rebounded 2.9% on the day the October data was reported (Nov. 7) and 3.6% on the day of the November data release (Dec. 5), despite the dismal numbers.

-- Tom Petruno