The S&P 500 gained 0.3% yesterday to close at 1413.94. To be sure, there has been a whole lot of headline back and forth on the election, the eurozone, and the fiscal cliff. Things have looked worse at times and things have looked better. The striking fact of the matter is that the market has basically gone nowhere since August 22 when it closed at 1413.49.
The election has passed (not that we don't continue to hear about it in the course of the fiscal cliff debate), but the eurozone and the aforementioned cliff remain lively sources for manic behavior in the stock market.
There wasn't a lot of excitement earlier this morning after Germany's Bundesbank lowered its 2013 GDP forecast for the German economy to 0.4% from 1.6%. That downgrade knocked the wind out of the euro and took some steam out of European bourses.
The S&P 500 futures sagged in response.
At 8:30 a.m. ET, however, the excitement factor ratcheted up several notches on the back of a better-than-expected Employment Situation report for November.
To begin, nonfarm payrolls rose by 146,000 (Briefing.com consensus 90,000), private sector payrolls jumped by 147,000 (Briefing.com consensus 120,000), the unemployment rate fell to 7.7% (Briefing.com consensus 8.0%), hourly earnings rose 0.2% (Briefing.com consensus +0.1%), and the average workweek held steady at 34.4 hours (Briefing.com consensus 34.4) while the manufacturing workweek edged up 0.1 to 40.6 hours.
There were downward revisions to the nonfarm payroll numbers for September (from 148,000 to 132,000) and October (from 171,000 to 138,000), yet things balanced out alright with the positive surprise for November. Since the beginning of the year, employment growth has averaged 151,000 per month.
Market participants were braced for negative surprises on account of the distortions created by Superstorm Sandy. However, the BLS surprised just about everyone with the acknowledgment that Sandy didn't have any undue impact, noting its survey response rates in the affected states were within normal ranges.
The S&P futures spiked on the headlines (now up 0.4%), not so much because the report was strong per se, but because it was not nearly as weak as some thought it would be.
The unemployment rate is at its lowest level since December 2008; however, the drop in the rate in November was a function primarily of lower participation in the labor force and not solely to more workers finding jobs. The labor force participation rate fell 0.2 to 63.6%.
Long-term unemployed workers accounted for 40.1% of the unemployed versus 40.6% in October. The November level is still slightly above the 40.0% rate seen in August. The U6 unemployment rate, which also includes marginally attached workers, fell slightly to 14.4% from 14.6%.
The stage is set for a positive open for the cash market. The November employment report was good, not great. However, with the report expected to be fairly disappointing, good qualifies as more than good enough to spark early buying interest.