The stock market shrugged off appalling jobs data on Friday to close higher, much as we might have expected. Although Beadledom’s best and brightest had been looking for unemployment to remain unchanged at 9.6% for November, it actually jumped to 9.8%, at least according to the official tally. (Shadowstats’ John Williams has offered convincing evidence that the true unemployment number is above 20%.) It was also announced that employers created just 39,000 jobs in November, down sharply from the previous month. Stocks initially fell on the news, but bears were easily repelled by the so-far invincible OPM/QE2 juggernaut in the opening minutes of the session. At their most fearful, sellers managed to push the Dow down only 43 points. The broad averages oscillated tediously for the next six hours, presumably until there was not a single seller left; then, they lurched higher to finish with the best rally of the session, achieving all of the day’s gains in the final fifteen minutes of the trading week.
Over the weekend, pundits would reflexively focus on the stock market’s amazing resilience in the face of such awful news. No doubt similar behavior was evinced in the staterooms and parlors of the Titanic when it was first learned that the ship had struck an iceberg. Statistically-minded bulls may want to make note of the fact that the Dow would hit 35000 sometime around August 2014 if it continues to rise at Friday’s pace.
More immediately, as we implied here in an earlier commentary, stocks are almost certain to continue higher for the remainder of the year. Short-covering opportunities are becoming increasingly scarce and may have dried up altogether on Friday with the revelation that horrific unemployment data alone will not suffice to diminish the flow of OPM into shares.
If there was any chance of a respite for bears, it was thought to lie in the fate of Bush-era tax breaks. Some pundits said that if the abatements were not extended beyond December 31, when they are due to expire, the stock market would crash. To be sure, if an extension is not enacted, that would effectivelyh usher in the biggest tax hike in U.S. history – just the thing to power us out of the Great Recession. However, much as we’d like to believe that such fears might impel Congress to extend the breaks, including for the ostensible “rich” with incomes exceeding $250,000, we doubt that anything short of a global nuclear conflagration or an eruption of the Yellowstone caldera will discourage institutional buying of U.S. stocks. Although we don’t foresee much of a rally into year’s end, the likelihood that the Dow, which finished the week at 11382, will end the year above 11000 seems almost beyond conjecture. We expect the blue chip average to trade as high as 11600 in the meantime, but to finish somewhere in the range 11250-11350. If so, it would represent a gain for the year of a little more than eight percent. Not bad, considering the economy remains hopelessly mired in the worst recession since the 1930.
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