A report showed today that purchases of new U.S. homes surged in October by the most in three decades. Sales jumped 25.4% to a 444,000 annualized pace, following a 354,000 rate in the prior month. In addition, companies boosted payrolls by a more-than-projected 215,000 last month, according to figures from the ADP Research Institute in Roseland, New Jersey. The Institute for Supply Management’s non-manufacturing index decreased to 53.9 in November from 55.4 in the prior month. The U.S. 10-year yield rose four basis points, or 0.04 percentage point, to 2.83% at 8:26 a.m.
Equities: The DEC13 E-mini S&P 500 (CME:ESZ13) dipped below 1790 after the jobs report was issued, but recently has staged a rally off of lows, now trading up 6 points to 1797.50. We believe overall that the market is more likely to treat “good” economic news as positive for the overall market. Especially at these levels, it seems like the market wants fundamental confirmation to support these prices. We have 1793 as a key pivot for this market, and as of now the market is above this level. Even with this rally, we believe if and when the Fed does indeed announce a taper, it could have a short term negative effect on the stock market. However, we believe that the market will have a positive year in 2014.
Bonds: The bond market didn’t take the positive jobs and housing numbers well, as the MAR14 U.S. 30-year bonds (NYBOT:ZBH14) are down 27 ticks to 129’11. If this is any precursor to Friday’s jobs report, we could see another bond market sell-off in two days, especially if the jobs number is 250K or higher. If we really do get into a consistent tapering cycle, we could see the bonds slide dramatically to 118. We believe these ideas really depend heavily on the upcoming several jobs reports.
Currencies: The DEC13 Aussie dollar continues its major weakness this morning, trading down a whopping 123 ticks to 90.07, briefly dipping below the key 90 level. We have the 88.90 area as a next potential downside target. The DEC13 Euro is also down today, after being unable to stay above the 1.36 level. The key driver this morning is the economic data out of the USA, which is providing support to the DEC13 USD index (NYBOT:DXZ13), which is up 25 ticks to 80.87. We believe this index could travel higher over the next few months in accordance with the potential tapering plans of the Fed.
Commodities: Gold has had an interesting rebound this morning, with the FEB14 contract (COMEX:GCG14) trading up $8 to $1,228. We believe this is light short covering, and not necessarily indicative of a major bottom. We still believe gold might try to find its way below $1,200. The grain markets are strong today, with MAR14 corn (CBOT:CH14) leading the way higher, trading up 1.51% to $4.38. JAN14 natural gas (NYMEX:NGF14) continues to show strength even at the $4 level. We believe the next target higher is $4.10, which is a technical resistance area. JAN14 WTI crude oil (NYMEX:CLF14) jumped higher yesterday on the Keystone pipeline news. Today this market is up $.77 to $96.81. We believe a short term barrier to be around $98. MAR14 copper has had a large short-covering rally, likely due to positive housing data.