The Dow's rebound to 11,000 on Friday seemed almost inevitable as investors shook off all the bad news and instead focused on slivers of hope in jobs, government intervention and politics.
By nearly any measure, Friday's nonfarm employment reportwas a disappointment: Payrolls dropped 95,000, the so-called "real" unemployment rate jumped to 17.1 percent and one of the few growth areas came in restaurant and bar jobs.
Yet there was Wall Street, sorting through the rough and finding diamonds in a private payroll increase and continued hopes that a second round of Fed money injections—commonly referred to as quantitative easing, or in this case QE2—would help right a listless ship.
"If there's a tiny positive, you just had a big job loss because you had a heavy loss in government workers. That's the start of a trend painful in the short term but positive in the long term," says Chip Hanlon, president of Delta Global Advisors in Huntington Beach, Calif.
"People might be peering through that a bit and seeing private-sector nonfarm jobs did expand—not enough, but at least there was some expansion," he adds. "It's less about the headline number and the underlying data and more a function of grim expectations."
Yet even the market's meager expectations—flat to slight losses in payrolls and a modest hike in the unemployment rate—weren't met.
The actual job loss was worse than feared though the unemployment rate held steady at 9.6 percent, which was more due to fewer people returning to the labor force than a leveling of job losses.
The U-6 unemployment measure, a broader gauge that includes discouraged workers, swelled to 17.1 percent, a five-month high.
But investors still piled into the market Friday, breaking the 11,000 psychological barrierwhere it last sat two days before the confidence-shattering Flash Crash, which saw the Dow drop as much as 1,000 points in one panicky May 6 session.
"The question that has to be asked—and answered—is why the equity market would be rejoicing over today's somber piece of economic news," David Rosenberg, chief economist and strategist at Gluskin Sheff in Toronto, writes in his daily analysis. "It could boil down to excitement over QE2, even if it is plain to see that QE1 failed in its broad objective to generate sustainable economic growth."
In Rosenberg's view, the jobs report may have been the worst of the year. Adjusting for the decline in labor market participation from frustrated job seekers, the jobless rate actually sits closer to 12 percent, according to his calculations.
And all the rejoicing over government jobs lost may be misplaced as well—"These folks don't spend money and contribute to GDP? Is that the takeaway?" Rosenberg asks.
The answer to Rosenberg's question could be that investors finally are moving away from low-yielding safety plays in the bond market and looking for more returns. With the two-year Treasury yield setting successive record lows and the 10-year below 2.50, investors aren't being given much choice.
"The mentality might be starting to change," says Nadav Baum, executive vice president at BPU Investment Management in Pittsburgh. "It's not about putting money in investments where I know I can't lose money, like money markets and Treasurys. It's where can I go to start making some money. That's why you're getting nice movement in large-cap multinational dividend-paying stocks."
Of course, there's always the Fed.
Market pros have grown increasingly skeptical of the central bank's intervention efforts and whether trying to push down lending rates through Treasury purchases will do any better this time than it did last time.
Wall Street, though, seems convinced easing will help asset prices rise.
"I'm not a fan of quantitative easing round 2," says Liz Ann Sonders, chief investment strategist at Charles Schwab in San Francisco. "It was right the first time, but personally I would have liked a little better (jobs) number to take the pressure of the Fed. There are plenty in the camp that thinks it's going to happen, so maybe that's why we got a little bit of a lift."
Politics also seems to be playing a role. A November takeover by Republicans in Washington is being anticipated as a tipping point towards at least gridlock if not a sea-change in the way Congress does business.
"That could be magic," Bill Spiropoulos, president of CoreStates Capital Advisors, said in a CNBC interview. "That could be something that changes the numbers, when people feel better and they start to think enough of this and there will be definite change. That's something that is not in the equation or in the market."
Indeed, the jump above 11,000 looked tenuous through the day's trading, and it probably will take even more than a better-than-awful jobs report, hopes for political change and another round of government money-printing to effect a lasting change in market sentiment.
"I don't think it's any one thing," Sonders says. "You need a collection of these things. It's hard to say what unleashes animal spirits, but when it happens it happens quickly and feeds on itself."