Thursday, November 5, 2009

With All Eyes on Jobs, Stocks Power Higher

The markets often find ways to correct their errant ways - like yesterday's late-day, computer-trade-driven sell-off - with immediate and powerful results. Such was the case on Thursday as stocks gained right out of the gate, fueled by better-than-expected results from Cisco (CSCO) and lower-than-expected initial jobless claims. The stunning number, however, was October productivity, which chimed in at +9.5%, well ahead of expectations of 6.5% and the strongest indication to date that companies are on the verge of hiring workers.

Productivity gains of such magnitude suggest that employers are getting every last ounce of effort from trimmed-down staffs and it may be time to begin expanding the labor force in a variety of industries. Tomorrow's Non-farm payroll report for October will fill in the last piece of the puzzle, though by all indications, investors feel comfortable being in the market prior to the 8:30 am release of the data, sending the Dow back up over 10,000 and the S&P past a key 1065 level.

Dow 10,005.96, +203.82 (2.08%)
NASDAQ 2,105.32, +49.80 (2.42%)
S&P 500 1,066.63, +20.13 (1.92%)
NYSE Composite 6,950.14, +119.71 (1.75%)

Once again, simple indicators told the story of a broad-based rally with considerable strength behind the headline numbers. Advancing issues pounded decliners, 5095-1389, and new highs soared ahead of new lows, 161-57.

Volume was less than usual, a somewhat sobering fact, though tracking the markets via volume has not been a particularly solid indicator during this rally. Lower-than-usual has been the case so often that lower volume figures have actually become normalized.

NYSE Volume 5,480,293,000
NASDAQ Volume 2,121,401,500

Commodities were muted as the dollar index remained relatively unchanged throughout the day. That stocks can move forward with such aplomb without the aid of a weaker dollar speaks volumes about the prospects for a robust recovery. On the day, oil lost ground, dropping 78 cents, to $79.62 at the close. Gold added $2.20, to $1,089.50, while silver dipped a penny, to $17.40.

A number of retailers released same-store sales figures for October, with results all over the map due to the recession, odd comparisons to last year because the damage to the economy was just beginning, and various discounting and inventory issues which varied by retailer. With the holiday shopping season just weeks away, investors will be turning their attention to retailers, with an eye toward an improvement over last year's near-disaster.

Tomorrow's jobs data should be market-moving, especially the unemployment figure which continues to hover close to 10%. That is the number many fear, that if the government announces unemployment at that level, it will trigger an all-out selling spree in equities as investors flee from speculative issues back into fixed assets. A reading of 9.8% might be just good enough to keep confidence high.

No matter the case, it seems that there is no ceiling on stocks. The turn-back over the past few weeks has been all but recovered, and the overall drop was another smallish 5-6% decline, instead of the "correction" of 10-15% that many of the so-called "experts" have been calling for since May. There's almost no reason to believe that stocks will pull back 10% any time soon, though tomorrow's jobs data could change that arithmetic.

For now, however, the recovery appears on solid ground. The final key is jobs and when they will come back.

No comments: