Low Demand for Equities Indicative of Top
U.S. equity markets traded sideway-to-better after the government released a weaker than expected jobs report. The unemployment rate hit also hit a 26-year high at 10.2%. The bears see this report as a sign the economy is worsening. The bulls read it as a chance to continue to demand higher risk because it reduces the likelihood of a Fed rate hike until mid-2010. This means that liquidity will be readily available for at least the next six months. While this may be true, equity traders failed to pounce on the chance to drive the markets higher. This is an indication that stocks may be overvalued and ready to roll-over.
Treasury futures moved up as yields fell Expectations are for interest rates to remain low well into 2010 as Chicago financial market traders reduced their bets calling for an interest rate hike around April 2010. Treasury Bonds and Notes seem to have survived the recent attempt at a sell-off. This could mean a sustained rally next week even though the Treasury will auction more debt.
The U.S. Dollar closed trading mixed after trading in a range most of the day following the release of a poor October jobs data report. The loss of 190,000 jobs was somewhat of a surprise. Traders were positioned for a loss of 175,000 jobs. The unemployment rate climbed to a 26-year high to 10.2% and the world didn’t fall apart. Traders either believe this is the bottom in unemployment or they have become complacent which could mean huge volatility is looming.
