Santa’s come early for the bulls. I can’t think of
any better gift than today’s ADP
payroll number. It’s probably tough to miss the news
that private sector payrolls rose 93,000 in November, according to
payroll services company ADP. That bodes well for Friday’s
November Nonfarm Payroll number.
One of the big drags on the economy and stock market
has been unemployment. And frankly, it will continue to be, perhaps for
years. The Fed’s best guess about unemployment has the rate holding above
7% into 2013.
But unemployment is improving. And as we’ve
discussed, unemployment is the last thing to start moving after an
economy comes out of recession.
December is traditionally the best month for the stock market. And we’re
starting this one with a bang. The S&P 500 held support at 1,175
yesterday. The 52-week high is at 1,226. I expect we’ll see a new 52-week
high by the end of the year, and I wouldn’t rule out a run at
In addition to unemployment, investors are also
struggling with European debt issues and inflation in China and Asia. But Portuguese bonds are
higher today, suggesting that investors are more comfortable with its
outlook. And China manufacturing data continues to be strong, despite the
government’s attempts to combat inflation.
Oil has been reacting to Chinese economic data more
than anything else lately, so you can keep an eye on oil prices as a
sentiment indicator for China, which, like it or not, is a
key source of global growth.
We should also be watching India. India‘s economy grew 8.9% in the
last quarter. And because India‘s economy is not
export-oriented, this is especially positive news. India is an emerging end
If there’s one negative aspect to the current investment environment, it’s
that bank stocks continue to lag. The negative sentiment from mortgage
put-backs, new stress tests for dividends and even the report that
whistleblower website Wikileaks is set to release some negative
information on one big bank is overwhelming right now.
The fact that banks like Bank of America
(NYSE:BAC) and JP
are trading below book value has not been enough to change
And not only that, the banks have active support
from the Fed and the Treasury. I have no doubt that, for long-term
investors, banks are attractive at current levels.
My upside expectations for the S&P 500 depends
on participation from the financials.
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