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Market in Fed's 'Hall of Mirrors' Again

President Obama, who looked like a chastised puppy in his press conference, was just given an early Christmas present: nonfarm payrolls not only rose 151,000, some 90,000 more than consensus, but the prior month showed a healthy upward revision, from a loss of 95,000 to a loss of 41,000. It was the first gain since May.

Average workweek increased to 34.3 hours, a bit more than expected, hourly earnings up 0.2 percent, also a bit more than expected.

So now we have QE2 (quantitative easing) AND some signs things are improving. S&P futures moved 5 points, and while this makes everything seem better, we are again in the QE2 Hall of Mirrors: this makes the need for large QE2 less likely, and to the extent that traders are "gaming the Fed" by buying ahead of QE2, it tamps down rallies.

Regardless: traders would rather have a strong economy over an aggressive Fed any day.

The dollar index is up sharply and has erased all of yesterday's losses.

European market rallied modestly, though stocks are still down in Spain, Portugal and Greece on continuing concerns about the economy and austerity programs. (See latest PIIGS Nations Credit-Default Swaps .)

Elsewhere:

1) buying bonds isn't good enough any more: the Bank of Japan confirmed that as part of its next round of stimulus it would be buying ETFs linked to the Topix Index and the Nikkei, as well as Japanese REITs. I repeat: the BOJ is now going to buy stocks and real estate. It's part of a $62 billion asset buying plan.

2) HMO Coventry2) HMO Coventry reported earnings well above expectations and is trading up 7 percent pre open. They echoed the sentiments of other HMOs: costs are lower mostly because clients are going to the doctor and hospital less.

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