Bulls Argue Decline Will Be Muted

US stocks dropped on the disappointing nonfarm payroll report(39,000 jobs vs. about 150,000 expected) and an increase in unemployment to 9.8 percent from 9.6 percent. Revisions for September and October were slightly higher. Perhaps most disheartening is the 0 percent growth in the average hourly earnings.

The Street was positioned for a good number, but many immediately said the selloff would likely be muted. Why? Bulls immediately began to argue that this will only accelerate QE2 and further stimulus efforts. "All you're doing is telling the fed they can print more," one trader said.

This argument—"heads stocks win, tails stocks win"—has been laughed at for months, but so far it has not been proven wrong. One trader put it simply to me: "Better number = better. Worse number = better. In line = uncertainty."

Now, all sorts of additional stimulus will be proposed—starting with the Bush tax cut extension for everyone, and extension of unemployment benefits of course, but this will quickly be followed by support for a partial payroll tax holiday.

As for stocks? This game of win no matter what might work through year end, but it will get tougher in 2011 if there is no progress on jobs.

Elsewhere:

Big Lots cut its outlook for the fiscal year after its Q3 earnings dropped 42 percent. The retailer now expects earnings of $2.75 from $2.81 a share from prior guidance of 2.82 to $2.90 as share.

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