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Is Soft Patch Temporary—or Not?

Friday, 8 Jul 2011 | 10:00 AM ET

Futures dropped 17 points as June nonfarm payrolls came in at 18,000 — well below expectations of 125,000. (Market open update: Stocks Sharply Lower After Dismal Jobs News) Private payrolls only grew 57,000, also disappointing. To top it off, April and May numbers were revised lower as well.

Once again, traders were whipsawed. Stocks were overbought going into the close yesterday (75% of stocks in S&P 500above 50-day moving average, according to Bespoke), so the first thought one trader messaged me was, "Oh sh***...I need to sell quick and lock in any profit i just made the past 2 weeks."

This will:

1) call into questionthe idea that the soft patch was temporary, but before anyone panics the job numbers are volatile and other economic data has looked better recently (Chicago PMI, ISM, and the ADP report),

2) give more impetus to the debt talks between the President and congressional leaders and increases the likelihood that additional stimulus measures will be enacted. Look for more talk of payroll tax holiday, repatriation of foreign profits, etc.

Does this mean the rally is over? Not necessarily — earnings are coming. So far, warnings have been very muted.

Elsewhere, Italian stocks are having a miserable week — down another 1.5 percent today (nearly 6 percent for the week). A key aide to Economy Minister Giulio Tremonti was arrested on corruption charges.

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

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