The U.S. jobless rate dropped to a five-year low of 7%, while the 203,000 increase in payrolls followed a revised 200,000 advance in October, the strongest back-to-back gain since February-March, Labor Department figures showed today in Washington. European stocks rose, ending a five-day losing streak. The Federal Open Market Committee next meets Dec. 17-18.
Equities: The DEC13 E-mini S&P 500 (CME:ESZ13) is up 17.50 points to 1801.50, staging a pre-open rally after the jobs report release, which seems to confirm our theme we issued yesterday of “good news is good for stocks, bad for bonds.” We have key resistance at 1808. Overall, it seems the market is excited about a continued economic recovery as evidenced by gains in jobs, and overall we think the market is strong and will head higher next year.
Bonds: The MAR14 U.S. 30-year bonds (CBOT:ZBH14) had a very interesting initial reaction to the jobs report, experiencing a sharp and rapid dip down to 128’01, but staging an impressive short-covering rally to 129’05, actually up 6 ticks on the day. Our feeling as that while the jobs # was impressive, it was obviously not impressive enough to fully convince the markets that the Fed will be in certain taper mode in December or January. The taper in these two months is surely a possibility, but as we have written, we think the market was looking for a 250K+ number to really have a big bond sell-off today.
Currencies: The DEC13 Yen/USD tanked this morning, trading down 105 ticks to 97.29, while other major currencies rallied today such as the Pound, Euro, Canadian Dollar, and Swiss Franc. Interestingly, the DEC13 USD index is up 12 ticks to 80.36. Again we think the USD would have rallied much more if the jobs # was 250K or higher. We believe the DEC13 Pound could head much higher from here, possibly to 1.67. The next major market moving event might have to wait until the mid-month FOMC meeting.
Commodities: Non-farm payrolls reports are notorious to bring volatile trading days, and this morning is no different. FEB14 gold (COMEX:GCG14) dipped to almost $1,210, but then rapidly rose all the way to $1,245, and is now up $1 on the day to $1,232. It is apparent that there has been serious gold buying interest anywhere close to $1,200. JAN14 natural gas (NYMEX:NGF14) continues its bull run this morning, up another $.04 to $4.17. We don’t think the rally is done. MAR14 copper is up today to $3.25. We could see this contract rally further as well, possibly as an indication of an improving global economic outlook, especially with this week’s housing report plus today’s good jobs report.