Intraday Market Update
Traders are cheering a worse than expected employment report which virtually guarantees another round of stimulus by the Federal Reserve. Today's employment report was mixed, but it did show +64,000 jobs were added in the private sector, although this was less than consensus expectations calling for +85,000 jobs to be added. After an initial spike lower this morning, all of the major indexes have recovered and are posting modest gains in the +0.50% to +1.00% range. The US Dollar gave up early gains but still remains above yesterday's lows which have not been seen since January. Short term US Treasury yields hit fresh all-time lows while the 10-year yield continues drifting lower to levels last seen in December 2008. Commodities have regained some of yesterday's losses as traders flock to hard assets on the notion that additional stimulus by the Fed will continue to devalue the US Dollar. Gold has recouped some of yesterday's losses by gaining +$10 to $1,145 per ounce. Front month crude oil has gained more than +1%. Copper has surged another +2.5% and is approaching pre-crises levels last seen in 2007/2008. Overseas, China had some catching up to do as the their market has been closed for a week long holiday. The Shanghai Index gained +3.13% with other markets in the region closing mostly lower. European markets staged a late day mini rally that pared losses to close mixed to slightly lower.

In total US non-farm payrolls fell by -95,000 jobs in September, which handily missed estimates calling for a flat to -5,000 reading. The loss in September jobs was centered at the state and local government level as many states struggle with huge budget deficits that necessitated job cuts. Private payrolls continued to improve but not at an acceptable pace to provide significant support of an economic recovery. The preliminary estimate for September called for +85,000 private sector jobs to be added, but only +64,000 jobs were added. However, the prior two months were revised higher by +36,000 jobs which essentially leaves private sector job growth in September near consensus expectations. The unemployment rate remained unchanged at 9.6% which was better than estimates of calling for 9.7%.

In the end, although the unemployment rate was unchanged at 9.6%, it remains stubbornly high and is well above the rate that the Fed views as consistent with full employment and price stability in the overall economy. The rate of improvement, or lack thereof, is not even close to bring down the unemployment rate in a reasonable time period. As such, today's report is likely enough ammunition for the Fed to begin a new round of stimulus in the coming weeks and months and is reminiscent of how the rally in stocks began in 2009.

However, there are members of the FOMC that say additional stimulus is not a slam dunk. St. Louis Fed President James Bullard told CNBC this morning that although the economy entered a soft patch this past summer, the data is not so bad that additional stimulus is a given. He said the Fed will remain "data dependent," by reviewing economic releases and adjusting their forecasts accordingly. Furthermore, he said that if the need for additional stimulus arises an incremental approach is more appropriate than large scale purchases.

In equities, Alcoa kicked off the official start of the Q3 earning season by beating consensus estimates across the board, although estimates have been significantly lowered by analysts in recent weeks. Nonetheless, JP Morgan upgraded the stock before the bell and AA has gained more than +6%. The company raised their 2010 forecast for global aluminum usage by +1% to 13% y/y. The upbeat forecast, along with the weak US Dollar, have helped stoke metal and mining stock gains across the board.

Elsewhere, a bullish USDA report on world agriculture supply and demand have helped drive gains in the agriculture sector. Grain futures opened limit up on the CBOT exchange and names like Mosaic (MOS), Monsanto (MON), Potash (POT), Intrepid Potash (IPI), Agco (AGCO), Deere (DE), The Anderson's (ANDE), and CF Industries (CF) are all sharply higher with many gaining more than +10%.

Core Sector List: Overall reading: 18 sectors advancing, 2 sectors declining
Strongest Sectors: Miners, Oil Services, Nat Gas, Internet
Weakest Sectors: Telecom, Banks


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