The S&P 500 closed just 2 points shy of its all-time high but after market news from the banks that the Fed is allowing them to buy back shares and increase dividends is likely to get it there at some point tonight. There is a bunch of options expiring tonight however so it could be a very interesting night and as the Soothsayer warned Caesar "beware the Ides of March". 

Over the past 24 hours however the key driver has been jobs data. Unbelievable jobs data in Australia, weak jobs data in Europe and encouraging jobs data in the US. 

Dealing first with jobless claims in the States it is clear that for the moment there is real healing going on in the economy. Jobless claims fell another 10, 000 last week to 332,000 and the four week moving average is being dragged lower also which is a good sign for both the economy and stocks. 

And it was stocks in both Europe and the US that were buoyed by the apparent improving US economy. on the Continent stocks were stronger across the Board. The periphery of Spain and Italy did best with the Spanish 30 year auction success driving their markets sharply higher. Spanish stocks rose 1.88% while in Milan stocks were 2.45% higher (Beppe who?). The CAC rose 0.94%, the FTSE was 0.73% higher and the DAX rose 1.09%. 

dax, frankfurt stock exchange, dax quote, dax chart

As you can see in the chart above the DAX is trying to break back up through and into the uptrend from last year. It is looking a little overcooked but time will tell.

In the US the Dow extended this little run to 10 days straight with a rise of 0.58%. The Nasdaq is up 0.43% and disappointingly the S&P closed a couple of points shy of its all-time high up 8 points or 0.55% at 1,563. MarketWatch reports this morning however that the volumes on the NYSE and associated with this run of wins is is below the average of the past 49 days. Nasdaq volumes are also below their recent averages as well. Interestingly MarketWatch juxtaposes the volumes that were in the market the last time the Dow had a run like this back in 1996 and says that volumes increased as the run extended.

Clearly this is a rally that is long in the tooth which may account for the falling volumes but the old futures trader in me says that this is a warning sign.

On the other side of the coin though the apparent recovery in the US economy is pressuring bond prices which in the end may be part of the transition from crisis to something more normal in terms of bond pricing and in time will eventually lead to a change in the Fed's stance.

US Generic Govt 10 Year Yield Chart - USGG10YR - Bloomberg

It is clear that US 10 year rates are on the rise. It is equally clear that unless the US economy turns tail and the ECRI's long held view that the US is in recession comes to pass that the lows for the cycle are in place. Indeed at auction last night of $13 billion of 30 years which went off at a rate of 3.248% which is still an amazing low rate at which to borrow for 30 years but is now the highest level since April last year.

After a low of 1.2910 Euro managed to rally to 1.3032 and sits at 1.3002 as we write. Perhaps its back to the US dollar being pressured when stocks have a good night as they did across the board last night. But it wasn't only the Euro that had a huge range with the Pound churning through more than 200 points in the past 24 hours. Making a low of 1.4909 the GBP rallied to 1.5118 and sits up 1.07% at 1.5079 as we write. That is a huge range for any Major currency but as we noted yesterday GBP's sell off looked a "little long in the tooth".

gbp, gbpusd, gbpusd price quote, gbp chart

GBP has now traded up and to our fast moving average for the first time since early Feb and we would be now targetting a move back to the slow moving average which comes in at 1.5324 today. Even just a normal garden variety retracement to the 38.2% Fibo level would suggest a move to 1.5418. Certainly the down trend is still intact but for the moment we'd rather be long than short.

Looking at the Aussie dollar yesterday's huge surge in employment in Australia has a scent of unbelievability about it which might account for why the Aussie didn't kick on as much as might have been expected with such a "strong" number. To put this increase in perspective the US labour force is about 13.4 times the size of the Australian Labour force as measured by the Department of Labour and ABS respectively. So the increase of 71,500 in total employment might be likened to an increase in non-farm payrolls in any given month of something like 960,000 Americans. Not impossible but certainly a couple or a few standard deviations to the right. And ultimately that is the key to why the Aussie couldn't get to 1.04 under its own steam but needed the US dollar to weaken and Euro and Sterling to rally. The number was just too big to believe, +35,000 jobs might have actually been better for the Aussie bulls. 

aud, audusd, australian dollar, australian dollar price quote, audusd

Looking at the chart though you can see that our moving averages are very close to crossing over from downtrend to up trend and we tweeted yesterday that we think 1.0512 is now in the frame. That remains our view based on our usual indicators and the set up.

on commodity markets crude was a little higher up 0.69% to $93.16 Bbl, Natural gas was through the roof up 4.16% while gold is roughly unchanged at $1587 while Silver lost 0.52%. Corn and soybeans both fell more than 1% while wheat rose 0.99%.

Data

A quiet night with CPI in the US, Empire manufacturing and Capacity Utilization. Can the S&P get there???

Twitter: Greg McKenna or @macro_business