So for the past two days the short-term trade has been: fade the market in anticipation of a nonfarm payrolls report below even the loss of 200,000 jobs expected, then go for a modest rally in the middle of the day Friday.
It makes sense, but regardless the economic and earnings data has been below expectations across the board. With auto sales at a 25-year low, major auto execs in Washington are pleading for help, and with many retailers with double digit same store sales declines in October, there is little good news.
For the second day, a broad swath of stocks have been down 4 to 10 percent. There is a slight defensive tone to the market, with less intense declines among healthcare and consumer stocks.
Elsewhere, the damage is pretty even, but two things should be noted:
1) some large financials (Citi, BofA,Goldman) are again at or near new lows;
2) commodity stocks are again underperforming the market: steel stocks like US Steel are down nearly 23 percent in two days (!!), Alcoa down 18 percent and Freeport down 18 percent,. Energy stocks have had similar declines, with Massey Coal down 22 percent, EOG down 8 percent.
What we need to have happen is this: the end of surprises. At this point, analysts and economists are going to cut their numbers aggressively (again!) and at some point, hopefully in the first quarter, they will overshoot and the economic and earnings numbers will again be better than expected.
By then, the stock market will have already sniffed out the recovery.
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