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Conflicting Reports Drive Market Choices: Dave's Daily

Bad news from Europe drove markets lower early despite better employment data within the U.S. The culprit in the eurozone remains the PIIGS (Portugal, Italy, Ireland, Greece and Spain) with Italy front and center. Unicredit one of Italy's largest lenders and banks saw its shares drop roughly 30% over the past two trading days. This affected all European market sectors which saw prices fall sharply. It also led the euro to decline 1.20% to a little over ¿127. Oddly, the previous bullish theme for U.S. stocks has been the combination of a weak dollar and strong stock markets. Also a weaker dollar was bullish for gold which was higher once again today. Are these relationships now shifting?

It seems too cynical to say but once the European markets were closed, U.S. stocks began to rally off their intraday lows to close mixed to higher on the day.

Investors embraced the better employment data from ADP (plus 325K jobs with many perhaps holiday seasonal) and Jobless Claims (372K vs prior revised higher "again" to 387K). Let's remember the data was from a shortened week and previous claims were adjusted higher as they have been previously 100% of the time. This makes headline improvements seem better right? Next week's report will also come from another shortened week. And, of course, Friday brings us the monthly Non-farm Payrolls report. The data in the U.S. has been improving glacially and bulls are quick to embrace it.

Also featured Thursday were results from retailers which were a mixed bag. Surprising disappointments were JCP (J.C. Penny) Kohl's (KSS), Gap (GPS), Target (TGT), American Eagle (AEO), Costco (COST) and so forth. Winners were Macy's (M), Ross Stores (ROST), TJX (TJX) and Zumiez (ZUMZ) whatever that is.

Technology was another winner Thursday led by Nokia (NOK) in the U.S. on Microsoft (MSFT) windows arrangement for handsets. Apple (AAPL) and Qualcomm (QCOM) remain big movers. 

Rumors that Obama would unveil a $1 trillion mortgage bailout got bank and financial stocks moving higher on Thursday. Is it just a rumor, a campaign stunt which would help his hated Wall Street 1% while helping the 99%? The whole concept is ludicrous but so has been everything else our central planners have conceived. Later per a source from Bloomberg: "The WH has no plan for mass home refinancing." A trial balloon perhaps?

Late breaking news is that Alcoa (AA), the first of the major companies to report earnings, preannounced a Q4 restructuring charges of 15-16 cents a share and a reduction of 12% of their smelting capacity. This isn't a bullish sign that's for sure.

Volume was light once again which is strange for this time of year when fund-flow from retirement plans should be significant. Breadth per the WSJ was once again positive.


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SPY - The SPDR® S&P 500® ETF is a fund that, before expenses, generally corresponds to the price and yield performance of the S&P 500 Index. Our approach is designed to provide portfolios with low portfolio turnover, accurate tracking, and lower costs.
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IWM - The iShares Russell 2000 Index Fund seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the small capitalization sector of the U.S. equity market as represented by the Russell 2000 Index. The index represents the approximately 2,000 smallest companies in the Russell 3000 Index.
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QQQ - PowerShares Capital Management LLC is passionate about our goal of delivering the highest quality investment management available through one of the more benefit-rich investment vehicles ever created, the exchange-traded fund.PowerShares QQQ¿, formerly known as "QQQ" or the "NASDAQ- 100 Index Tracking Stock®", is an exchange-traded fund based on the Nasdaq-100 Index®. The Fund will, under most circumstances, consists of all of stocks in the Index. The Index includes 100 of the largest domestic and international nonfinancial companies listed on the Nasdaq Stock Market based on market capitalization. The portfolio is rebalanced quarterly and reconstituted annually.
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