The November jobs report shocked investors who thought that the unemployment rate would remain unchanged. Instead, Labor Department data showed unemployment increased to 9.8% and only 39,000 jobs were added in November.

Economists had expected payrolls to rise 144,000 and for the unemployment rate to stay at 8.6%. And there were some economists who said that the real rate of unemployment is closer to 17%, pointing out that current reporting does not take into account marginally attached workers, persons employed part time who want full-time work, or those who have fallen off of the unemployment rolls without getting a job. 

Investors took the bad news as a sign that the Fed would continue on their bond purchase plan and that Congress would extend the Bush-era tax cuts. In an interview with Fed Chairman Ben Bernanke this weekend, he revealed that he is “not ruling out purchasing more bonds to aid the U.S. economy.”

The Institute of Supply Management reported that non-manufacturing activity came in at 55, which was close to expectations. And factory orders for October fell 0.9%, but that was not as bad as estimates.

The euro rose against the U.S. dollar, trading at $1.3416, up from $1.3207 late Thursday. The 10-year note fell and its yield rose to 3.01%.

At Friday’s close, the Dow Jones Industrial Average rose 20 points to 11,382, the S&P 500 gained 3 points at 1,225, and the Nasdaq gained 12 points at 2,591. The NYSE traded 908 million shares and the Nasdaq crossed 486 million shares. Both exchanges saw advancers exceed decliners by about 1.6-to-1. For the week, the Dow gained 2.6%, the S&P 500 rose 3%, and the Nasdaq was up 2.2%.

Crude oil for January delivery rose $1.19 to $89.19 a barrel. The Energy Select Sector SPDR (NYSE: XLE) rose 29 cents to $65.82. December gold spiked $16.90 to $1,405.40 an ounce, and the PHLX Gold/Silver Sector Index (NASDAQ: XAU) gained 4.44 points and closed at 225.27.

What the Markets Are Saying

In addition to the S&P 500 and Nasdaq ignoring the disappointing jobs numbers and gaining on Friday, there was a more interesting technical development last week that, so far, few technicians are discussing. It is the new high made by the Dow Jones Transportation Index, which broke to new highs on Wednesday. 

The importance of a new high in the Transports is that the index almost always moves higher as a result of a better economy. However, unlike like the jobs data, which is a lagging indictor, the index is considered a forward indicator.

Now that the Transports have popped, we’ll be watching the action of the Dow Industrials for a confirmation that a new leg up in the broad market is occurring. A failure of the Industrials would be a negative sign called a non-confirmation, but it is unlikely that this will occur as long as the Fed keeps pumping money into the markets.

Despite the perverse reasoning that unemployment is good news since it will push the Fed to buy more bonds, stocks in the near term will likely move higher.

On CBS’s “60 Minutes,” Bernanke said, “It’s certainly possible the Fed could expand a program to buy $600 billion in Treasury securities beyond the initial target it announced about a month ago.”

But what will happen when the Fed decides that enough is enough? The markets will likely collapse of their own weight since the vast flow of funds that are pushing equities higher is coming from the Fed. 

There was one piece of news from Europe that caught my eye and literally made me do a double-take: On Friday, the European markets rallied because the European Central Bank (ECB) said it has decided that the U.S. Fed’s decision to buy bonds is such a brilliant strategy that it will embark on a similar program. As a result, the ECB will shortly begin purchasing member countries’ central bank obligations — the difference, however, between the Fed’s action and the ECB’s is that the Europeans will be buying the debt of Portugal, Ireland, Greece and Spain.

The unfortunate result of a European Union collapse from this trans-global shell game may not happen for several years. For now, our markets are breaking out and we must not fight the tape, so be long stocks. But some sectors will do better than others, and precious metals still top the list of stocks that could help us hedge against the inevitable results of this international folly.

For one precious metals ETF to buy now, see the Trade of the Day.

Today’s Trading Landscape

To see a list of the companies reporting earnings today, click here.

For a list of this week’s economic reports due out, click here.

If you have questions or comments for Sam Collins, please e-mail him at samailc@cox.net.