Major rally started December as new economic news proved that the economic recovery was gaining strength. The Dow Jones closed up 2.3%, Nasdaq up 2% and S&P up 1.6%.
The private sector added 93,000 jobs in November after an expectation of 58,000 jobs, polled by economists. Also there was an upward revised October's job creation from 43,000 to 82,000. The Chinese also posted a positive manufacturing number which gave signs of stability in China.
It didn't stop there, the Fed released numbers from the Beige Book which showed improving economic climate around the country, this included a very positive consumer spending numbers. Later, Goldman Sachs increased the GDP outlook for the US in 2011 from 2% to 2.7%.
Ford Motor Corp said they saw a 24% raise in car sales for November, GM saw 12% increase.
A major thought on the minds of traders today was whether or not the S&P would close above the 1200 mark, which in theory, gives a great chance of a "Santa Claus Rally" to close out the year. The S&P closed up 1206 today passing that mark. After the huge news today, I think that a Santa Claus rally could be possible with only one obstacle on the horizon...Europe. Europe has been a major issue for traders lately and it isn't going to go away until decisions are made and steps are taken to resolve, or at least temporally capped.
Jobs Reality (Downer Debby alert!!): Yes, jobs are being created and less people are filing for unemployment benefits. That is great news but there are under-the-surface reasons behind those facts. Employers tend to hire more staff around the holidays to cope with demand of the season. Most of these jobs that are being created now will be lost in January. I guarantee January's job report is not going to be showing that employers added more jobs because of the fact that we are still in a downturn and we are not in that point of the recovery yet where sustainable job growth is a reality. The huge optimism behind jobs right now is great but remember that unemployment is still at 9.6%.
Look, I'm not trying to ruin the party and kill the fun but it is better to be a smart trader than a trader who doesn't step back and look at the full picture because those traders always get burned in the end. Its about positioning yourself to outperform and make money rather than falling for the false hope that is jobs.
For example, 93,000 jobs were created in private sector, sweet. What you may not know is that today, State Street Corp announced that it will be cutting 5% of its workforce to cut costs. This is just one more example that yes, jobs are getting temporally better for the holidays but the underlying facts are that a recovery is not coming soon.