EmailNovember started with a bang as the major averages all logged gains of at least 1.0%. Buying interest was broad-based and was led by growth-sensitive sectors while counter-cyclical sectors trailed the action.
The rally gear, however, was shifted to neutral in overnight trading as participants hunkered down for the October nonfarm payrolls report.
That report, which is the last key report ahead of the general election on November 6, was good -- not great or terrible, but good.
Nonfarm payrolls increased by 171,000 (Briefing.com consensus 125,000) and were revised higher for August (142,000 to 192,000) and September (114,000 to 148,000). Private sector payrolls rose by 184,000 (Briefing.com consensus 130,000).
Hiring activity was fairly broad-based by industry and was led by a 51,000 jump in professional and business services.
With a large jump in the labor force, the unemployment rate ticked up to 7.9% from 7.8%, which was in-line with expectations. Hourly earnings were flat (Briefing.com consensus +0.2%) while the average workweek held steady at 34.4 hours (Briefing.com consensus 34.5).
Long-term unemployed workers (i.e. 27 weeks or more) accounted for 40.6% of the unemployed versus 40.1% in September and 42.2% a year ago.
The U6 unemployment rate, which also accounts for marginally attached workers and those working part-time for economic reasons, dipped to 14.6% from 14.7% in September. That figure suggests roughly 1 out of every 7 people of working age are either unemployed or underemployed. That is obviously not good, but it is better than the 16.0% rate seen a year ago.
To be sure, the political spin on this report today should be entertaining. Both parties can do some cherry-picking of the data to advance their respective cases (and trust us, they will).
The early voting by the market is that it liked what it heard in the employment situation report. The S&P futures, which were flat before the release, have risen about six points in the wake of the report. The Treasury market, meanwhile, surrendered its gains as the safety trade has been reversed.
That should set the stage for a higher start for the broader market and should provide some added support for specific stocks like Starbucks (SBUX), Priceline.com (PCLN), and LinkedIn (LNKD), which were already doing well in pre-market action following their reassuring earnings results and guidance.
