American employers added more workers to payrolls in October than forecast by economists. Labor Department figures showed today in Washington that the addition of 204,000 workers followed a revised 163,000 gain in September. Treasuries lost the most in two months. Payrolls increased at manufacturers by the most since February.
Equities: The DEC13 E-mini S&P 500 (CME:ESZ13) went down to 1736.50, but is currently staging an impressive rally from the lows, now trading up 10 points to 1755.25. Two of our key resistance points near here are 1754 and 1758. It looks like the market is now taking “good news as good news,” rallying on signs of a healthy U.S. economy. We still believe 1770 is a significant barrier. But, if the market breaches this level, we could see a wave of short covering bring the market higher.
Bonds: The bond market is really the story of the morning, with the DEC13 U.S. bonds (CBOT:ZBZ13) trading down around 2 full points, breaking the 132 level. From a technical perspective, we notice a potentially bearish candlestick formation on the daily chart, with today’s action showing a “bearish outside reversal day.” We believe today could start a new bear wave in the U.S. treasury market, and would not be surprised to see new lows hit for 2013 before the new year. If the market really starts to anticipate a December taper, we would see bonds slide further. The Fed officials have been clearly focusing on jobs growth as a precursor to tapering, and this morning we all saw a significant upside surprise in jobs growth.
Currencies: The jobs report has caused movement in the FX futures, with the DEC13 USD (NYBOT:DXZ13) trading higher by a solid 60 ticks to 81.45. The DEC13 Yen/USD is down 129 ticks to 100.90. We believe the Yen could fall significantly from here to the mid 90′s. The DEC13 Euro futures are down 91 ticks to 133.38, and it seems as though US and European interest rate policy may be starting to diverge, with the ECB just cutting rates, while the US Fed may start to taper in the next couple of meetings.
Commodities: Gold is down big today on the 200K+ jobs report. DEC13 gold (COMEX:GCZ13) is down $23 to $1,285, breaking the key $1,300 barrier. We believe if this tapering idea really takes hold, gold could slide further, potentially to $1,200. Other commodities are somewhat quiet, but there is a USDA report coming out this morning which could affect the grain and agriculture markets. DEC13 corn (CBOT:ZCZ13) is down almost 2 cents to $4.1875, and is almost at our target level of $4.16. DEC13 coffee (NYBOT:KCZ13) is stabilizing this morning, after a big capitulation down move on Wednesday.