Stocks soar on jobs, possible ECB action
Private-sector payrolls in the US increased by 93,000 in November. Markets rally on speculation that the European Central Bank may step in to contain the eurozone debt crisis.
By Melinda Peer, TheStreet
Updated at 1:16 p.m. ET
Stocks were up more than 2% Wednesday, with the Dow Jones Industrial Average ($INDU) holding a 200-point gain as an increase in private-sector employment and speculation that the European Central Bank will enact measures to contain the eurozone debt crisis when policymakers meet Thursday.
"The market was slated to open higher on two factors: China’s manufacturing sector grew and we had less of a hectic day in the foreign exchange markets,” said Peter Cardillo, chief market economist at Avalon Partners. “It appears that some of the comments that (ECB President Jean-Claude) Trichet made to try and calm the markets helped a little bit. But markets really added to gains after the ADP report, which was quite encouraging.”
Private-sector jobs in the U.S. increased by 93,000 in November, according to Automatic Data Processing's employment report, released this morning. October's increase of 43,000 payrolls was revised to 82,000. Wall Street had anticipated job gains of 58,000, according to Briefing.com.
"If we close above 1,200 on the S&P, I think green lights are flashing for this market to have a good December,” Cardillo said, adding, “Despite the better economic numbers, there are still a lot of worries out there and the big challenge will be whether the Bush tax cuts will be extended.”
Global markets jumped Wednesday as two Chinese manufacturing reports showed strong growth in November and as manufacturing surveys for Britain and the eurozone showed that the recovery remains intact. The FTSE in London was up by 1.7%, and the DAX in Frankfurt was ahead by 2.1%. Hong Kong's Hang Seng added 1.1%, and Japan's Nikkei gained 0.5%.
The euro gained strength against the dollar, rising to $1.3105 from $1.2981, despite news that Standard & Poor's said it will put Portugal's rating on review for a potential downgrade. Better-than-expected demand for Portugal's 500 million-euro auction of one-year Treasury bills helped ease some jitters about whether the country might require financial aid.
The National Commission on Fiscal Responsibility and Reform proposed a series of cuts and tax changes that would achieve nearly $4 trillion in deficit reduction through 2020. The plan calls for a 15% reduction to congressional and White House budgets, pay freezes for federal workers and a hike in the normal retirement age to 69 by 2075.
The plan would raise $80 billion in taxes by 2015 through an overhaul of the tax code that would lower rates but broaden the tax base, creating three new tax brackets for individuals, lowering the corporate tax rate to 28% and treating capital gains and dividends as regular income. The committee meets to discuss the proposal today and will vote Friday.
The Labor Department upwardly revised third-quarter productivity to 2.3%, which was nearly in line with market expectations for an upward revision to 2.4% from its previous read of 1.9%. That compares with a decline of 1.8% in the second quarter. Unit labor costs were downwardly revised to a dip of 0.1%, compared with the 0.5% decline that economists had been expecting, according to Briefing.com. The Labor Department initially reported a 0.1% drop in third-quarter unit labor costs after growth of 1.3% in the second quarter.
The Institute for Supply Management said manufacturing activity was little changed in November. The ISM index fell to 56.6 from October's level of 56.9, though any number over 50 signals growth. Expectations were for a reading of 56.5, according to Briefing.com.
The Commerce Department said construction spending rose 0.7% after similar growth in September. Economists had been expecting an increase of 0.5%, according to Briefing.com.
The afternoon session brings November vehicle sales and the Federal Reserve's Beige Book at 2 p.m. The report is a compilation of anecdotal evidence on economic conditions across the Fed's 12 districts and will be used at the Federal Open Market Committee's Dec. 14 meeting.
General Motors (GM) reported bullish sales for November, with overall sales rising 11% year over year and sales of its core brands increasing by 21%. Analysts had expected GM to report an 11.5% increase during the automaker's first sales call in more than a year and a half, since it emerged from bankruptcy and returned to the NYSE last month.
Ford (F), meanwhile, reported a 24% increase in November sales, and said year-to-date sales have risen 21% -- more than double the industry average. GM shares were up 2% to $34.87 while Ford was gaining 3.4% to $16.49.
Shares of State Street (STT) were up 4.1% to $44.98 on the financial holding company's late-Tuesday announcement that it was cutting 1,400 jobs, or 4% of its workforce.
The Energy Information Administration said crude oil inventories gained 1.1 million barrels in the week ended Nov. 26. The increase disappointed expectations for a drawdown of 1.5 million barrels, according to a Platts survey of analysts. Late Tuesday, the American Petroleum Institute said crude stockpiles declined by 1.14 million barrels.
The January crude oil contract was up by $2.05 to trade at $86.16 a barrel. The most actively traded February gold contract was up by $6.50 to $1,392.60 an ounce.
The dollar traded lower against a basket of currencies with the dollar index down by 0.8%, and the benchmark 10-year Treasury note weakened 16/32, strengthening the yield to 2.935%.
A couple of comments:
1. Unemployment is becoming the new welfare check. Much too long a time period. The more someone sits on their duff collecting a check, the less likely the probability of actively looking for work (average 5 weeks before benefits run out whether 26 weeks or 99 weeks). It's human nature and the Liberal dream. As an afterthought, any welfare or unemployment applicant should be subjected to initial and then weekly drug screening. If clean, OK; If not-Bye bye check.
2. Today is quiet around here. Most transactions (buys mostly) were done yesterday PM and the day before. If the S&P closes over 1200 (psychological, not technical resistance), we should have a great December. If not, it's wait and see. I still think it will end the year between 1200 and 1250. If not, no biggie for my clients as they really loaded up when it was around 700. They are investors, not traders.
3. The employment numbers did NOT include those hired as seasonal workers. They are listed differently and do not skew the results.
4. Wikileaks is a joke and is now only a memory. The pervert who runs it will soon be jailed for his criminal acts and discredited even among his followers. Come out, come out wherever you are Julian!!!
Where's Disgusted American? Probably too busy running his business. Anyway, I'll say it for him - for those who get it, no explanation is necessary. For those who don't get it, no explanation is possible.
Deklen, where did I make fun of anybody but you? Please quote me. Human nature has been shown to take the easy road. The longer UE benefits exist the longer people stay on it before looking for work.
"Life is tough. Life is tougher when you are stupid."
Sorry life is so tough for you.
Yes ending the UE benefits would be a good idea. Things are always tough, and that's an inescapable fact of life. If we keep giving these people money, they'll never have the desire to do anything. We already have a nation of entitled crybabies who thing the government's duty is to care for them.
The last boom created a lot of jobs that aren't coming back, so I expect a higher UE rate going forward. Another fact is the market isn't about UE but earnings which look very good.
It appears more and more that team obama knows exactly what they are doing with the economy. it's getting stronger everyday.
if you speak to employment recruiters the first thing they say hiring is picking up fast.
so let's give the unemployed they means to stay on their feet get transitioned and pay their phone bill so they can get that call to come to work.
know one who had a job before is glad to egta $300 dollar a week unemployment check. anyone who says they are is just stupid.
Mirage Guy -
Why should those who have money have it stolen from them to support the poor?
Taxation isn't theft, it's responsibility. If you don't like paying them you're free to leave. Exits are along the north, south, east, and west borders of the country.
I'd elaborate, but I know your question is rhetorical.
Why don't the poor start a business, work hard, and advance? Clearly if they do not, I ask you why not?
Four reasons come to my mind:
1. Lack of starting capital.
2. Market saturation.
3. Lack of necessary skills or information to take advantage of existing opportunities.
That's three more than you can think of.
It seems to me, that you want socialism. You want to treat people UNEQUAL. You want to redistribute the wealth.
I don't want to treat people unequally at all. But redistributing wealth, yes, absolutely. The current distribution is far from optimal. I would even go so far as to call it dangerous. We're already at banana republic levels of wealth inequality. The next step involves guillotines.
We do not want to work overtime so you can sit at home.
So don't. No one is forcing you.
No, Xplo, you've got it all wrong. What I am saying is that "the people sitting around saying the government needs to keep taking care of them" need to start doing whatever it takes for them to take care of themselves and their families.
If this means taking an $8.00 an hour job as a store clerk and downsizing into a rental with some relatives then so be it.
I'm pretty sure that's a lowered living standard. So when you say "you've got it all wrong", what you actually mean is "yes, that's it exactly."
The entitlement mentality has to stop. No one owes you or anyone else a living standard.
And what about the wealthy? Why are they owed their standard of living? By what right do they exclude a struggling American population from America's capital? Do you really believe that the founders intended to create a nation that was for sale to the highest bidder?
LOL... GamerK we need 125,000 new jobs a month to keep up with population growth. 95,000 of which 53,000 are temp seasonal help do not a recovery make...
Sorry to burst your bubble.
*sigh*, some people just don't get it. Even temp workers contribute to the economy. They spend money, and spending money creates more jobs. Hence why ANY postiive trend incidates a breakout, as job growth happens on a bell shaped curve (accelerating over time, until it peaks). That is, once you start creating job growth, it accelerates, almost without end, until it peaks.
Secondly, these numbers are ~200,000 jobs better then this same time next year, so even in the worst case, you have to accept we are SIGNIFICANTLY better off then we were at this point last year.
And thirdly, again, take a look at public/private splits. Private sector by itself has done fine (again), and once the public sector gets in line, we'll see 125,000/month, easy.
Abe: Savings funds borrowing. Both on the side of public and private debt. When there is a shortage of savings, interest rates climb. When there is a glut of savings, as there is now, interest rates are low to induce borrowing. Since the savings is literally sitting in a bank's reserves and not being borrowed by a private enterprise or individual, it's stagnant. Funding stimulus efforts via debt takes advantage of spending stagnant money instead of increasing taxation which can potentially be more productive.
Money Wise -
The more someone sits on their duff collecting a check, the less likely the probability of actively looking for work (average 5 weeks before benefits run out whether 26 weeks or 99 weeks). It's human nature and the Liberal dream.
You know, this is a blatant lie and it's well past time people were called out for telling it.
The "liberal dream" isn't to have a nation of poor, lazy morons who are wholly dependent on the government to provide them with welfare checks paid for by impoverishing anyone who works. The liberal dream is to have a nation of free men (and women, of course) who work for a living and receive fair reward. The liberal dream is to have a strong and prosperous middle class that allows all Americans the opportunity to better themselves, to fulfill their public responsibilities as (small "r") republicans, and to pursue their individual dreams.
As an afterthought, any welfare or unemployment applicant should be subjected to initial and then weekly drug screening. If clean, OK; If not-Bye bye check.
Sure, and what do you suppose is going to happen to the people who fail that test? Do you really think that they'll just disappear when you stop giving them money?
If you are unhappy with something that kind of, sort of, partially resembles free market capitalism, perhaps you would be happier if you moved to Venezuela, or Cuba or China or North Korea, or another location where the gov provides housing and food and jobs to all of their citizens.
with 5 unemployed for every 1 job opening, I suppose cutting off unemployment will force that one person to accept the $9/hour job, but what about the other 4?Midwest and others:
Gee, in a pie in the sky world it would be great to just keep everyone on unemployment forever. Why don't we just put them on UE until they reach Soc. Sec age and then just roll them onto another govt program.
Reality check: Our country is on the verge of bankruptcy. Where is the money to pay all these UE benefits going to come from. Yup, more debt. So great, let's bury the entire system in the name of "helping people" who are unemployed.
Some of you need to travel to the third world and see what people do when they "really want to work." Multiple families in the same household with several people working to pay the bills. Midwest, do you think Americans are too good for this?
We better all buck up, or there is not going to be any country to give anyone any benefit of any kind.
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[BRIEFING.COM] The Dow Jones Industrial Average, Nasdaq Composite, S&P 500 and S&P 400 are each up 0.2% in what has been a choppy trade today. It is peculiar to see such uniformity in returns. If we didn't know any better, we'd say the computers are calling the shots today.
Whatever the case may be, it is evident that the market isn't going to cough up last week's gains easily -- certainly not today anyway.
Large-cap and mid-cap issues look to be the outlet of ... More
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