Stocks Higher on December Job Report! Stocks opened sharply higher thanks to the better than expected monthly nonfarm payrolls report. The jobs report was the best since November 2008, with headline unemployment of 7.0%, although the work participation rate is near its lows.
The Reuters/University of Michigan consumer sentiment index for December beat expectations with a 82.5 reading. This confidence measure has generally been sliding since hitting 85.1 in July (the highest since July 2007) and hit 73.2 in October (the lowest since December 2012) as a result of the government shutdown.
Chicago Fed dove Evans welcomed the jobs report though he still has a little concern about the low labor participation rate and jobs growth still needs to be proven sustainable as the jobless rate overstates improvement. It was good evidence that the labor market is moving in the right direction and he’s open minded about when tapering should begin. Once the Fed decides to taper, key will be that markets understand forward guidance and he thinks they’re getting a better appreciation of the message. He would be open to strengthening guidance by lowering the jobless threshold to 6.0% (from 6.5%). He remains nervous about low inflation, while core PCE is a better indicator and the Fed needs to defend the inflation target from below as well. Evans sees 2014 growth as "pretty good" between 2.5-3.0%, which would be bolstered by diminished fiscal drama. Overall this is less dovish than usual for Evans.
We traded below the 20D SMA and now we are back above 1800 set as a reference level. I still see the test for the 1820 area in the SP futures.
