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Daily Blog -02/06/09- 2:16 P.M.


Bulls Buy the Bad News

Stocks are sharply higher on Friday in spite of grisly numbers from the Labor Department's non-farm payroll (jobs) report. The Dow Jones Industrial Average and the S&P 500 are both on track to end a four-week losing streak. Financials are the best performers as investors flood into beaten down banks on hopes of a real bank bailout and stimulus plan.

The big story today was the Labor Department's non-farm payroll report. Economists were expecting the country to lose 525,000 jobs in January. The report came out this morning at 598,000 in job losses with the Labor Department revising December higher to 577,000 from 524,000 lost jobs. January's nearly 600K decline is the worst monthly loss in almost 35 years. This reading on the labor market puts unemployment at 7.6% up from 7.2% in December and the highest level sine 1992.

I warned readers last night in our play updates and new plays section that investors have been buying the bad news and we could see a relief rally on the jobs report if it wasn't disastrous. Financials are huge out performers today with the banks soaring on hopes that the government will finally get it together and come up with a comprehensive bailout for the banking sector.

The BKX banking index is up 11.7% and the BIX banking index is up 12.7%. Shares of Citigroup (C) are up 12.3% at $4.00 after bouncing from $3.18 this morning. J.P.Morgan (JPM) is up 9.6% at 26.90. Meanwhile BAC is a huge winner with a 32% gain at $6.40. The stock gapped open higher at $5.39 and is breaking out past its short-term trend of lower highs.

This is an extremely widespread rally with every sector trading higher. The only thing I see trading in the red is gold, the U.S. dollar, and the VIX volatility index.

I'm listing four charts today showing the rally in stocks.

Chart of the S&P 500:

Chart of the NASDAQ Composite:

Chart of the Dow Jones Transportation Index:

Chart of the BIX banking index:



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