Markets Surge on US Jobs Report

S&P futures moved up 7 points as April nonfarm payrolls added 244,000 jobs, well above expectations of a gain of about 185,000.

Thoughts on silver and commodities. Silver is down another 8 percent this morning. Precious metals and to some extent other commodities have been driven by a weak dollar, rising inflation, low interest rates, and the higher liquidity provided by QE2, which is now ending.

Here's the problem: the real driver of long-term demand — global growth — may not be as strong as people thought. So, in the U.S., if we are not going to have 3.5 percent GDP growth in 2011, but instead will have 2 percent growth...that trumps any of the factors in the above paragraph.

That's what it has felt like in the last few days: macro guys derisking. That's why it has been straight down.

Not helping, of course, is the decision by the Comex to hike margin rates for the fourth time — to 30 percent. To give you an idea of what this means, it nows costs $21,600 for a 5,000 ounce silver contract. That is about 9 percent of the nominal value of the contract; it was about 3 percent a month ago.

A final problem: we are dealing with ridiculously small markets. The total global demand for silver is about 1 billion ounces, according to Deutsche Bank. Much of that is now in non-physical demand, meaning ETFs.

Finally, there is a bit of good news here: it's good news that commodity costs are coming down. Crude oil, for example, is now coming down to where it takes away the "crude is so high that it will impact growth" story.

So while traders — and ETF holders — who are long commodities are unhappy, Main Street will be perfectly happy to hear about lower gas prices.


1) E&P company EOG Resources was up in pre-open as it reported earnings of $0.68, well above consensus of $0.54, on stronger production — oil output was up 4 percent, natural gas up 2 percent. Full year production guidance was unchanged.

2) Wellcare was up 8 percent on earnings well above expectations, and raised its 2011 guidance on increased membership and a lower medical cost ratio.

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