If investors had realized how strong the post election Bush
bounce was going to be the margin of victory may have been
a lot wider. The markets are in breakout mode and a sudden
burst of jobs activity should guarantee they stay that way.
What a week! The Dow was up +3.6% and the SPX stretched
its streak of consecutive daily gains to nine days. The
SPX has not posted a streak like that since 1997. New
multiyear highs are popping up everywhere. Bulls have
broken out of the channel and new individual 52-week
highs were seen on 722 stocks on Friday. For the third
consecutive day up volume has been nearly 3:1 over down
volume and that volume has been strong with four
consecutive days in the 4.5 billion share range.
The markets exploded out of the gate on Friday and the
incentive was a blowout jobs report. The headline Jobs
number showed a gain of +337,000 jobs and nearly twice
the official estimates of +160k-175K and nearly three
times the whisper number at 125,000. It was a monster
number and there was improvement in almost every area.
Even September's gains were revised up +43,000 from the
prior 96,000 estimate. August gains were revised up
by +70,000 to 198,000 from 128,000. This was a simply
incredible report given the persistent weakness in the
various economic reports over the last month.
The first conclusion analysts jumped to was a strong
bounce in temporary jobs due to the hurricane rebuild
effort. There was an increase in construction of +71K
jobs and the BLS said many of these were hurricane
related. More important was an increase of +272,000
jobs in the service sector. Temporary employment jumped
+48,000 and suggests there could be a continued increase
in permanent jobs ahead. Total Household employment,
a completely different survey, jumped +298,000 for the
month. Adding it all together we saw a +337K headline,
+43K increase for Sept, +70K increase in Aug and a gain
in household jobs of +272k for a grand total of +722,000
jobs. It does not get any better than this and it erased
the "Bush Jobs Deficit" completely. How ironic that the
Jobs release in October was well below estimates and
allowed Bush to be verbally abused at even a higher
intensity level for the last month of the campaign.
All during that time the actual numbers were exploding.
Hindsight is always 20:20.
The markets could not have been more excited. A monster
increase in jobs for the October period suggests Nov
and Dec could also be strong. Holiday retailers should
be ecstatic as jobs produce happy consumers. That allows
for profits in the entire retail food chain and a ripple
effect that will be felt by manufacturers.
The downside of the jobs numbers was a sharp increase
in the expectations for continued rate hikes. On Thursday
the expectations were only slightly over 50% for a hike
in December and that jumped to 81% on Friday. There is
some talk now that a 50 point hike could be in the cards
for November. Obviously this would not be received well
by traders but with oil falling it might be a minimal
impact.
Oil hit a low near $48 on Friday and well below the
$55.65 high we saw last week. |
