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Strong NFP Beats the Bears

By: Minyanville
Posted: 12/6/2013 4:45:00 PM
Referenced Stocks: AAPL;BKS;NFLX;PVH;TSLA

The S&P 500 (INDEXSP:.INX) rose 1.1% to 1805.09 on Friday on the back of a better-than-expected November employment report.

The Bureau of Labor Statistics said that nonfarm payrolls rose 203,000, which was almost 10% ahead of the 185,000 consensus. Additionally, manufacturing payrolls were ahead of expectations at 27,000, the unemployment rate fell to 7.0%, and, in a departure from recent economic trends, the labor force participation ticked up from last month.

But that wasn't the only data we saw today. October personal spending was 0.3% vs. expectations of 0.2%, while personal income dropped 0.1%, which was well below the +0.3 consensus.

Plus, the Fed's preferred inflation measure, the PCE deflator, was in-line with expectations with a 0.7% increase. It was the lowest reading since 2008, the second lowest seen in 30 years, and well below the Fed's 2% target.

The initial reaction to this 8:30 a.m. EST data deluge was negative, with S&P futures dropping eight points within three minutes, presumably on fears of the Fed tapering its QE activities in reaction to the strong numbers.

However, the market had fallen five straight days into the report, and given the Fed's reluctance to provide any specific guidance on timing for a taper, it's not clear that any one economic number could lead the Fed to pull back.

The mood today was also helped by the better-than-expected University of Michigan sentiment survey, which came in at 82.5, much better than the 76.0 consensus.

In stock news, book retailer Barnes & Noble ( BKS ) dropped 12.0% to $14.43 on news of an accounting investigation by the Securities and Exchange Commission.

Looking at sectors, we saw impressive action in homebuilders, financials, and industrials, though all S&P groups finished in the green. On the negative side, the action in high-beta tech was mixed, with key momentum names like Tesla ( TSLA ), Twitter (NYSE: TWTR ), and Netflix ( NFLX ) selling off.

Index leader Apple ( AAPL ) was also weak today, though the stock had rallied strongly in recent days on bullish analyst notes and reports of an iPhone deal with China Mobile.

Tomorrow's Financial Outlook

Monday will be a fairly quiet day news-wise. There are no major economic reports scheduled, though the October wholesale inventory and JOLTS job openings reports will be out at 10:00 a.m. EST.

There will be a few earnings reports on the calendar, with the more notable names being PVH Corp. ( PVH ) and Casey's General Stores (CASY).

Twitter: @Minyanville