Trader Talk

Better US Economic News, and Outlines of a European Deal

after nonfarm payrolls were about in line with expectations at 123,000, but the headline unemployment rate of 8.6 percent, well below expectations of 9 percent, and October nonfarm payrolls were revised upward.

U.S. economy surprising on the upside: From ISM to construction spending to the ADP Employment Report, Chicago PMI and pending home sales, economic news this week has been better than expected. The U.S. economic data has been a topic of conversation all week, not quite crowding out Europe, but finally getting some due.

German Chancellor Angela Merkel, as expected, has proposed expanding the powers of the euro zone countries to monitor national budgets, to be enshrined in treaty changes. But it's unlikely this is the end of the story: Getting treaty changes in all 17 countries would simply take too long. The European Union leaders meeting next week are likely to float proposals for bilateral agreements that could "end-run" a full treaty change.

The outlines of the deal are clear: The Germans get their treaty changes, and allow the European Central Bank a little more wiggle room. While Merkel continues to dismiss eurobonds or Federal Reserve -style money printing from the ECB, she will clearly go along with the ECB stepping up buying of sovereign debt .

Italian 10-year yields continue to drop, to 6.58 percent.


1. One trader this morning characterized the recent action as "a trading market with large has to trade the ranges and not get married to any position."

He's not kidding...S&P futures have gone from about 1260 a little more than two weeks ago, to 1147 a week ago, and back to 1260 today...a nearly 10 percent swing! In about two weeks!

The S&P 500 Index is up 7.4 percent in just four days! The Dow Jones Industrial Average up 7.0 percent, the Nasdaq Composite Index up 7.6 percent. If pre-open gains hold, those three indices could see their best percentage gain since at least March 2009.

The Dow is just 211.62 points shy of a 1000-point week. The Dow has never had a 1000-point gain during a week before — the average's largest weekly point gain ever is 946.06 points, back during the week ended Oct. 31, 2008.

2. Big Lots falls 6 percent despite beating estimates (17 cents a share vs. 9 cents a share consensus). The discounter reported inline sales, with U.S. same-store sales up 1.7 percent. Earnings guidance for the current quarter was raised to $1.59 a share to $1.66 a share, inline with $1.63 a share consensus, with an expected 1 percent to 2 percent rise in same-store sales.

3. Research In Motion shares drop 5 percent after the BlackBerry maker warned it will miss its 2012 earnings target of $5.25 a share to $6 a share, citing lower shipments in the last half of the year. It will also take a $485 million third-quarter charge related to inventory valuations of its struggling and now heavily discounted Playbook tablet devices.

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