Bulls Get Good News But Skeptics Remain

Here are my midday observations:

1) Bulls get what they want on payrolls.
--Upward revision in August
--September slightly above expectations
Bottom line:
--Recession argument lessens
--Rate cut still a possibility

2) So we have several positives this week:
--Jobs report strong
--Volatility dropping (the VIX, a measure of fear and volatility, at lowest levels since July)
--Commercial paper market improving
--Dow, S&P at historic highs

3) Still, there’s plenty of skeptics around. This business where banks and brokers like Merrill, Citi, and UBS announce billions in losses, and their stocks go up because they are “getting all the bad news out” drives skeptics nuts. “Bob, there is no penalty for buying stocks,” one hedge fund manager told me. “Stocks go up for taking all these losses, longs say ‘Gee, if there not going down on this bad news I am buying.’ Then the shorts say, "Gee, if there not going down on this bad news, I am covering."

4) Next week:
--Will data confirm a recession is unlikely? Retail sales Thursday: expect many to blame warm weather for a weaker number, but the commentary will be more important.
--Inflation hawks out—we’ll hear much more about bond yields moving up, and increased inflation risks
--Marketing TXU loans. The marketing for the loans on the $32 b TXU deal may commence; betting is it will get done.

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