Job Losses Grow, But Market Rallies In Anticipation of More Stimulus

Stocks are rallying in early trading, despite a weaker than expected jobs report. Nonfarm payrolls fell 598,000 in January, versus expectations for 540,000 jobs lost. The unemployment rate also ticked higher to 7.6%. That's still well below 1982 levels, even as I expect it to continue to tick higher in the coming months. But in the end, unemployment is still a lagging indicator. Don't use it to forecast the market.

With the jobs report behind us, investors are looking towards the announcements regarding the stimulus plan being proposed in the Senate, as well as a plan to help banks that is expected to be announced on Monday. Let's hope they address the mark-to-market issue that is hampering banks.

Bank stocks are leading the action, with the index spiking +8.7% so far. Banc of America (BAC) is rallying +22%, after several executives and the CEO bought more shares recently. I would think Ken Lewis wouldn't invest millions of dollars if the bank was about to be nationalized, or the common stock was going to be wiped out. The buying stands in stark contrast to Lehman Bros., where no one was doing any insider buying during the collapse.

Energy stocks are lagging, after oil fell back below the $40 level. Insurance stocks are also weak after Hartford Financial (HIG) reported earnings and said that it will look to reduce risk and cut its dividend.

Asian markets rallied overnight, with Hong Kong spiking +3.6%. The dollar is mixed this morning, while the Yen continues to drift lower. The 10-year yield is ticking higher to 2.94%. And the VIX is -2.5% lower to 42.65. I would like to see it get down below the 40 level in the near future.

Trading comment: I still have most of my trading etf long positions on, though I am getting closer to taking partial profits on MOO. The SPX might bump its head at resistance at its 50-day near 869. The put/call ratio has been low recently, so I also wouldn't be surprised to see a couple day pullback next week.

If we get a big Monday open on the heels of some bank news, I will probably look to put on some short-term hedges in trading accounts via inverse etfs. But let's not get ahead of ourselves.

long MOO, SSO