There were several helpings of promising news on Wednesday, not to mention the fulfilled expectation of a no-surprises Fed meeting. Didn't help. The market got off to a roaring start, the Dow gaining as much as 155 points or 1.5% during the session and the S&P500 adding 16 points or an equal percentage. Then, as is sometimes the case after a Fed meeting, it couldn't hang on to its gains and thudded in late trading. At the finish there were scant increases in the Dow and the S&P500, up 0.31% and 0.10% respectively; the Nasdaq, after gaining as much as 24 points or 1.16%, lost 1.8 points or 0.09%.


Contributing to the glowing start were two jobs reports before the open, both of them boding well for Friday's government employment report. First, Challenger's October count of layoff announcements, not a big mover but watched nevertheless, fell to 55,679 from 66,404 in September — the lowest total since March 2008. October last year saw 112,884 layoffs announced, so year over year improvement, if you want to consider less badness an improvement, is undeniable.


Shortly thereafter the Automatic Data Processing (ADP) payroll count reported a fall of 203,000 private-sector jobs in October compared to the 227,000 drop in September (itself revised upward from 254,000) — the fewest jobs lost since July 2008. Goods-producing jobs fell by 117,000 in October, including 65,000 in manufacturing and 51,000 in construction; services-producing jobs fell by 86,000. In total, private-sector employment stood at 108.5 million last month by ADP's calculations, down 7.2% from 115.6 million in December 2007 when the recession got under way. That about squares with government estimates.


The ADP report comes two days before the government releases its own estimate of October nonfarm payrolls. Economists expect payrolls to drop by 150,000 in the government survey, the smallest decline since August 2008.


Incidentally, the world's largest payroll processing company reported its own higher-than-expected results today, largely due to cost-cutting. Income climbed 2 cents year over year to 56 cents while revenue fell 4%. Naturally, as employment goes, so goes ADP's revenue, since it processes one out of every six payroll checks. ADP, who surely has its finger on the pulse of employment every bit as accurately as the government, says "Certain market indicators suggest that the U.S. economy has reached the trough of the downturn and has begun to stabilize." They ought to know. The company raised its full-year revenue forecast, and its shares are near a 52-week high.


The mid-morning announcement of the non-manufacturing index (NMI) by the Institute of Supply Management was down a sliver from the previous month but still indicated growth. Every month the ISM asks purchasing managers whether business is better or worse than the month before; a reading above 50 indicates that more respondents say growth is improving while a reading below 50 means it's worsening.

The NMI composite index came in at 50.6%, down from September's 50.9%. The NMI business conditions index, analogous to a production index, showed a faintly stronger rate of month-to-month growth. The new orders index was even better, up 1.4 points to a solid 55.6; this index is accelerating, unlike the ISM's new orders index for manufacturing. Order backlogs were also higher, up 2 points to 53.5.


Fully nine of 18 industries grew, including real estate, rental & leasing; management & support services, construction and utilities. Seven slid, including entertainment & recreation — although Disney was one of the day's winners after getting the go-ahead from China to pursue plans to build a theme park in Shanghai (see graph above) -- food services, transportation and finance & insurance. In a slightly jarring note, the non-manufacturing employment index fell more than 3 points to 41.1, indicating that fewer businesses were hiring in October even as production and new orders increased, a bit of a negative for Friday's employment report. Only real estate, mining, and management services said they added employees last month:


If you find yourself in one of those uncomfortable conversational lulls at your next cocktail party, you might casually mention that one of the commodities down in price last month was chicken, one commodity not surprisingly in short supply was masks for TB/H1N1 use, and one up price was cheese.


The market drifted somewhat lower until the main event Wednesday afternoon gave it a jolt. At its Open Market Committee, the Federal Reserve made only minor edits in its policy statement, holding a steady course and repeating that it expects to keep interest rates low. It kept its target for its federal funds rate in a range of zero to 0.25%, repeating polysyllabically that it "continues to anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period." (We've been hearing that "extended period" phrase since March.)

The Fed again this month cited low resource utilization and negligible inflation as reasons for unusually low rates. Of course, one of the earmarks of clinical insanity is continuing to do precisely the same thing over and over and over again in the absence of the desired result, but we'll talk about that another time. The Fed also said it would purchase $175 billion of agency debt, down from prior plans to purchase $200 billion.

The economy grew at a 3.5% annual pace in the third quarter, the Fed reminded us, absolutely in line with expectations and the fastest pace in two years. Still, members were unconvinced that a sustainable recovery was in the making: The economy "is likely to remain weak for a time," said the statement, also noting that "businesses are still cutting back on fixed investment and staffing, though at a slower pace." However, U.S. consumers weren't holding on too tightly to their wallets, it seems, according to the Bureau of Economic Analysis:


Economists expect the Fed to hold interest rates close to zero into 2010; some see no action at all until 2011. Still, a few mavericks think there's a wisp of a chance the Fed could start changing its mind at its next policy meeting December 15-16. If that's the case, over the next six weeks the Fed could start subtly preparing markets for a rise in rates. Bernanke will give a speech in New York on Nov. 16; some Fed watchers will be listening very, very closely for any hint of a shift.

All things considered, it looks like the slender recovery will probably continue into the fourth quarter. But the economy should pass two tests before the central bank gets entirely out of the way. There has to be some sense that the economy is moving on its own and that growth is not only from massive government stimulus plans. And maybe even tougher, growth will have to be fast and strong enough to bring unemployment down, with real signs of capital spending.

The late-day slump was certainly due in part to institutional investors locking in profits on any good news before the end of the year. Investors especially avoided small-cap stocks and financials as the day wore on, keeping to defensive stocks that are often popular in times of economic uncertainty.


Insurers were particularly hard hit, with American International Group (AIG) off 14%, Genworth Financial (GNW) off 6.9%, and Hartford Financial Services Group (HIG) off 4.1%. Despite the sector's bad cold, financial-services-to-the-wealthy firm National Financial Partners (NFP) responded to Tuesday evenings's way-better-than-expected earnings announcement and added $1.06 or 13.37%. The company tripled earnings to 24 cents a share; cash profit of 61 cents a share beat estimates by 16 cents.


Treasury prices were lower, with the 10-year note down almost a half of a percentage point to a yield of 3.526% and the 30-year bond off 1/32 to yield 4.394%. After a few up days, the dollar fell against every major foreign denomination except the Japanese yen. That strengthened commodity prices. Gold kept climbing, up $2.40 to a fairly eye-popping $1,086.70 per ounce.


Oil futures fell from the day's high but stayed above $80 a barrel after the Energy Information Administration reported an unexpected drawdown in U.S. reserves of crude. The drawdown came to 4 million barrels last week; also down were supplies of gasoline and distillates. The crude drop is tied to a falloff in imports, down some 750,000 barrels a day. Blame decreasing refinery output, now at a very low 80.6% of capacity, for the distillate drop. Gasoline demand is also falling (who's driving to work?). Still, there's no shortage of crude out there, so we can assume that speculation is playing its part in all this. Oil is up over 78% this year.

All in all, this is a strange market to try to read. If I had to guess, I'd say a drift sideways or even higher could last through the middle of the month. Let us hope the indexes go on to surpass mid-October's high: Nobody but shorts wants to see a double top.

And now, having taken too many plane trips in the last couple of months, I thought I'd share with you my tale of aviation woe. No doubt you know what I mean:

Tomorrow's movers should be reports on natural gas, jobless claims, and productivity and costs, along with rate announcements from the Bank of England and the European Central Bank. Earnings continue with CBS, Boston Beer, Air Methods, Lincoln Educational Services, Jones Soda, International Game Technology, Omnicare, Unilever, Manulife Financial, Dynegy, Nvidia, ResMed, SGL Carbon, Starbucks and World Wrestling Entertainment, among a raft of others.