Weak Employment Data Weighs On Stocks, But Bounce Looks Promising

The market is lower in early trading after some weak employment data, which we should all be expecting as the norm right now. The ADP payrolls report showed employment fell by 250,000 in November (vs. -205k consensus). That's pretty weak, but Friday's govt. report is the one that counts. The consensus for Friday is -325,000 jobs. Ouch.

The November ISM services report was alos weak, dropping to 37.3 (vs. 42.0 consensus). But the 3Q productivity report was revised higher to +1.3% and unit labor costs revised lower to +2.8%, both of which are positive in terms of lower inflation.

Materials stocks are weak this morning after warnings from Freeport-McMoran (FCX) in the copper space and Alpha Natural (ANR) in the coal industry. Both companies are lowering their outlooks due to sharp price drops in the underlying commodity as well as weaker end markets.

RIMM also lowered its Q3 outlook, citing the stronger dollar and lower-than-expected unit shipments. But the stock has recovered its early losses and is currently in positive territory. I think the stock could continue to bounce into year-end.

Asian markets were higher overnight. The Yen has been up the last 2 days, but is currently moving slightly lower. The 10-year yield is up a bit to 2.76%. And the VIX is down -2% to 61.7, still above its 50-day average.

Since I started writing this post, the market has reversed its earlier losses, and is now in positive territory. This is a nice showing, if it lasts into the close.

The S&P 500 continues to hover around that downtrend line that I posted a chart of last week. I think if it can hold the 850 level for the remainder of the week, that puts the market in good shape for a year-end rally. I am looking for the SPX to rally up to the 1000 level over the next couple of months, and will look to start dipping my toe in with all the cash I have built up.