The stock market's powerful two-day rally nearly fizzled out Friday after the unemployment rate unexpectedly jumped to 9.8% from 9.6% in a broadly disappointing November jobs report. Given that the Dow rallied 356 points in two sessions partly on expectations of a blowout Friday figure, it's amazing the stocks managed to sneak out of the week with gains, says Cort Gwon, director of trading strategies and research at FBN Securities.
"The market was very resilient considering how bad the payrolls data were," Gwon says. Bulls were primed for a strong Friday report, especially in light of the robust ADP private payrolls report released earlier in the week, says Gwon. But November's numbers were a raspberry.
"Economists were looking for anywhere from 100,000 to 170,000 new jobs," Gwon says. "Whisper numbers were as high as 200,000. Instead, we added just 39,000 to payrolls last month."
Yet after spending most of the session in negative territory, the blue-chip Dow Jones Industrial Average ($INDU) gained 18 to close at 11,382. The broader S&P 500 ($INX) likewise turned positive late in the day, tacking on 3 points to close 1,225. The tech-heavy Nasdaq Composite ($COMPX) closed up 12 points at 2,591.
Make no mistake: the November jobs report -- the most important event on the economic calendar -- was a failure, Gwon says. Average hourly earnings were essentially unchanged, as was the average workweek. The broader underemployment rate stayed stuck at 17% and the number of folks out of work for 27 weeks or longer increased to 6.3 million. The list goes on.
The markets' remarkably muted reaction to the jobs report may be attributable its almost cockeyed way of discerning a silver lining in such things, Gwon says. Traders take the dismal jobs data as something that bolsters the Federal Reserve's case for QE2 -- which has been very bullish for stocks and commodities. How much longer, Gwon asks, before the lousy labor market forced the Fed to start thinking about QE3?