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Traders Ask, "What Urgency?"

Despite tremendous fear that the nonfarm payroll report would be a complete disaster tomorrow, traders acted like there was little urgency. Volume was light, volatility was low and with the exception of one sector (retail) all S&P sectors were up or down less than one percent.

Two factors helped stocks midday: a successful ten year Treasury auction, and a report that Citigroup is supporting a law that would allow bankruptcy courts to alter the terms of mortgages

The S&P 500 is up 0.7 percent for the first five days of the year—this is a positive, since the first five days indicator is considered an early warning system.

What's up with the lack of panic over the jobs report? Traders were full of surprisingly optimistic commentary, which went like this:

1) There has been lots of bad news this week: ADP report and Wal-Mart in particular, both notably worse than expected, yet despite this the S&P is only down 3 percent for the week.

2) This decline, after an 8 percent rally in the last 5 days of last year and the first 2 of the new, is pretty modest.

3) the expected stimulus package has been an important factor in stabilizing the markets in the past few weeks.

4) The markets have not only priced in bad news, it has priced in some news even worse than expected.

5) To go down BIG (back to the November lows and beyond) a couple things will have to happen:

a) We are going to need REALLY bad news for several weeks, and

b) There needs to be really poor execution of the stimulus package--less stimulus than expected, poor mix, etc.

These events may happen (indeed, it is the core belief of the bear argument that the news flow will be shockingly bad for months on end--the Nouriel Roubini Armageddon argument).

But more than a few traders think the risk is increasingly to the upside, not the downside.

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Questions? Comments? tradertalk@cnbc.com

  • A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

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