Jobs Report Much Better Than Expected

The market is pushing further to new highs, after breaking out above Aprils highs yesterday. Investors seem emboldened by the combination of gridlock in Washington, new quantitative easing by the Fed, and comments by the President yesterday that he is willing to discuss keeping the Bush tax cuts from expiring.

This morning, the big economic number was the October nonfarm payrolls report, which came in much better than expected. The economy added 151,000 payrolls last month, far more than the consensus estimates for 60,000. Additionally, private payrolls grew by 159,000, the most since April. The unemployment rate held steady at 9.6%.

One theory is that since slashing headcount after the 2008 recession, business have squeezed as much as they can out of productivity increases, and now need to start to adding employees to grow their businesses.

For the second day, financials (+2.46%) are leading the way after news came out yesterday that better capitalized banks may soon be given the freedom to raise dividends and reinstate share buybacks. Defensive consumer staples and healthcare are lagging.

Asian markets rose overnight; the dollar is up a bit today, holding oil and gold flat near $86.50 and $1382, respectively. Gold prices rose sharply yesterday after the Fed news.

The 10-year yield is bouncing a little to 2.52%; and the VIX is down again to new multi-month lows at 17.97.

Trading comment: I was wrong about the sell the news reaction, so I have more cash on hand than I would like. I often talk about not wanting to chase stocks higher, but it seems that each and every market dip is being quickly snapped up by underinvested portfolio managers. As such, I would look to use any near-term weakness to do some additional buying, while keeping some reserves in case we get a deeper pullback. Tough game.