Wednesday, December 2, 2009

ADP Employment Number Trumped by Stronger Dollar

The market loves liquidity, lately, the kind that gushes forth from the font of a weaker US dollar. And since the market did not get what it wanted today, stocks pouted, putting on their most forlorn looks and stubbornly refusing to come out of their basement room.

After a relatively strong start, boosted by the private ADP Employment Report for November (-169.000 jobs), stocks took note of the dollar's strength against both the Yen and the Euro and headed South for the day. Coming one day after a major uptick, it probably wasn't such a bad move, and consequently a light one, though many were more hopeful for some follow-through on the back of Tuesday's semi-sweet rally. When all was said and done, of the major markets, only the Dow Jones Industrials finished in the red. Other indices posted marginal gains.

The Forex wouldn't allow stocks to advance much at all, however, as the perverse risk trade trumped all bets, good, bad or indifferent.

Dow 10,452.68, -18.90 (0.18%)
NASDAQ 2,185.03, +9.22 (0.42%)
S&P 500 1,109.24, +0.38 (0.03%)
NYSE Composite 7,222.42, +10.34 (0.14%)

Internals belied the headline numbers. Advancing issued finished the day well ahead of decliners, 4091-2396, and new highs beat new lows, 467-86. Volume was surprisingly strong for such a light news day, once again slightly better than usual. These indications bode well for the remainder of the week and month. It should be reiterated that stocks have patterned in the same manner over the past three months, with the best gains in the first 10-12 days of the month.

NYSE Volume 4,568,939,000
NASDAQ Volume 2,076,633,000

Strength in the US Dollar didn't stop gold from continuing its dramatic climb, posting another record close at $1,213.00, after gaining $12.80 on the day. Silver improved, though only by 12 cents, to $19.33. Crude oil lost $1.77, to $76.60, though that decline was keyed mostly to improvement in existing supply than anything else. In general, the energy and food complexes were all lower, with precious metals the only sector showing gains.

After the close came news - from CNBC's Charlie Gasparino - that Bank of America would exit the government's TARP program, with plans to raise capital to repay the entire $45 billion to get out from under the government's thumb. Some of the reasoning behind such a move would surely include the search for a new CEO to replace Ken Lewis, who has stated that he would step down from the position at the end of 2009. Government strictures on pay levels for executives whose firms have received TARP funds have limited BofA's search for a new CEO. Lifting the government pressure from the firm would pave the way for a new Chief Executive free to earn a competitive salary.

The surprising announcement also revives the conspiracy theory that the entire "financial armageddon" scenario of 2008 was smoke and mirrors orchestrated by the banks in the largest swindle ever perpetrated on the public. If Bank of America - like many of its colleagues - can suddenly find the means to repay an emergency loan all in one fell swoop, the veracity of the entire financial industry should be scrutinized with a more curious eye.

No matter the case, Bank of America's departure from the TARP is welcome news at a time the market needs a bit of a catalyst to move ahead. Whether this is really the kind of event which will propel stocks will have to wait until tomorrow.

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