Friday, December 02, 2011

Unemployment Rate Drops To March 2009 Levels

The market is higher this morning on the heels of further action in Europe to deal with the debt crisis, and an in-line employment report.

Europe was already higher this morning after news out that the ECB would loan the IMF 100-200 billion euros to fight the debt crisis. This is a backend way to get the IMF involved, by the ECB giving them the initial funds. But 100-200 billion euros is a drop in the bucket, and there is going to have to be much more involvement. I suspect EU officials will try to bring in more funds from surplus countries like China, Brazil, etc.

Here in the U.S., the nonfarm payrolls report showed that the economy added 120,000 jobs, in-line with estimates. Private payroll additions were a little higher at 140,000 (also in-line). But the big surprise was the unemployment rate, which dropped unexpectedly to 8.6%. It is now back to levels we haven't seen since March 2009. Some will argue that it's due to more people dropping out of the labor force, but that still leaves fewer people looking for jobs.

In corporate news, RIMM lowered guidance and said it will take a charge related to its Playbook inventories. That means it couldn't' sell as much as it thought, as iPad remains the #1 tablet. It's stock is down -9% so far. As for WDC, it's up 10% after raising guidance and saying it will resume production that had been halted due to flooding in Thailand.

The euro is lower today, but that isn't really hurting commodities. Copper prices are higher, and oil and gold are steady. Oil prices are still hugging the $100 level, and gold is up slightly near $1753.

The 10-year yield is easing back a bit to 2.07%; and the VIX is down -3.6% right now to 26.40. It had been down to 25.30 earlier before bouncing higher. As I have said, a move below 25 that sticks would likely embolden the bulls to be even more "risk on".

Trading comment: The market has now been up big for 4 of the last 5 sessions, even though we still have a long way to go today. But I will post a chart later that shows that the market has reached some important resistance levels and is likely due for a little pullback. I am trimming a few positions just slightly, and will wait to put more cash to work on said pullback vs. chasing things here. I hope I'm right. We are also getting into the time of year when performance anxiety peaks and where more good news out of Europe over the weekend could lead to additional short-covering.


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