Wall Street Gets Its Wish -- Now What?
Sat May 8, 2004 07:21 AM ET
By Dick Satran

NEW YORK (Reuters) - Wall Street got what it wished for this week -- powerful job growth. But now it's starting to get careful.

For months investors have worried that a jobless recovery would crimp the economy and were looking for real signs that employment was increasing.

But they reacted to a strong April payrolls report by dumping stocks on fears the Federal Reserve will boost interest rates. Analysts agree an early rate rise is likely, but say it won't throw the economy or the stock market into reverse.

The downturn Friday carried the Dow Jones industrials 400 points below its April high. The pullback began last month with another surprisingly strong jobs report. Friday's report that nearly 300,000 jobs were created last month added to the pressure on the market because it all but confirmed the first Fed rate rise since 2000.

"The market always gets scared in the middle of a policy shift," said James Glassman, senior economist for J.P. Morgan Chase. "It tends to freeze for a while. But as the process gets under way, that's usually the green light for the equity market."

The tightening probably won't take place until next month's Fed meeting, analysts said. But the 'fast money' held by hedge funds and other professional investors has been acting for more than a month as if a rate cut had already taken place.