October non-farm payrolls soared by 204,000, well above estimates of 120,000, with upward revisions in September (to 163,000 from 148,000), and August revised upward as well. Private payroll growth was 212,000, the strongest since February.
S&P futures dropped 10 points, the 10-year Treasury yield went from 2.6% to 2.7%, the dollar index rallied to a near two-month high, and gold dropped from $1,307 to $1,292.
Huh? Wasn't the government shutdown was supposed to turn this into an irrelevant, disposable number?
Yet this report was so strong that, even accounting for gyrations around the shutdown, you have to conclude that the job market is performing stronger than expected.
The shutdown was from the 1st to the 16th. There were statistical changes made to account for the shutdown. The establishment survey, which is what the nonfarm payrolls are based on, was the week of the 12th. Anybody who received at least one day of pay during that cycle was considered employed.
Regardless: the number was so impressive that you've got to acknowledge that--statistical gyrations or not---the report indicates growth. Even if you haircut the current private payroll growth of 212,000 to 180,000, that's still pretty strong.
However, is it strong enough for the Federal Reserve to taper in December? Probably not, but the bond market thinks it is, and we know the bond market can run ahead of reality. They did it last time, when they jacked 10-year yields to 2.90 in early September, when everyone was convinced they were going to taper in September.
Is there any more data that would convince the Fed to taper? You only have one more jobs report for December before the Fed meeting December 17th-18th. Even if that is strong--above 200,000--the rolling 3-month average is still below 200,000. It's unlikely there is enough data points for them to move by then.
But if the December number is strong, the bond market will continue to try to taper for the Fed.
1) Key market leaders are losing their luster. It's been a strange week for the major indices:
Dow Industrials (Dow Jones Global Indexes: .DJI) down 0.1%
S&P 500 (^GSPC) down 0.8%
Russell 2000 (:.RUA2-XX) down 1.5%
Dow Transports (Dow Jones Global Indexes: .DJT) down 1.5%
NASDAQ (^IXIC) down 1.7%
S&P Midcap (CME:Index and Options Market: .MID-P) down 1.8%
It's not a full route, but this week has been one of the poorest showings in some time for sector leaders:
Biotech (XBI) (XBI) down 4.5%
Natural Gas (XNG) (GAZ) down 3.4%
REITs (RMZ) (^RMZ) down 3.0%
Emerging Markets (EEM) (EEM) down 2.9%
Semiconductors (XSD) (XSD) down 2.0%
Airlines (XAL) (NYSEArca:.XAL-P) down 2.1%
Bottom line: Anyone who bought stocks in the last four or five days has been a loser. There were a number of strange trading days this week, the weirdest of all being Wednesday, when the Dow was up 120 points on a day when the NASDAQ and Transports were down.
Still, we have seen this story before (May/June) and so far this year it has turned into nothing more than a short-term phenomenon.
2) China's Plenary will convene this weekend; Stocks were unimpressed as the Shanghai Comp (Shanghai Stock Exchange: .SSEC-SZ) fell 1.1 percent.
-By CNBC's Bob Pisani
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