MarketView for November 8

Summary

The major equity indexes were higher on Tuesday for the second consecutive day as late-in-the-day news about Europe sparked an afternoon rally that erased early weakness. Specifically, Italy's president said Silvio Berlusconi, the country's prime minister, would resign after a new budget law was approved.

The financial markets had been hoping and actually expecting the resignation, which is seen as clearing the way for a leader who will act more aggressively to tackle the country's debt problems. The PHLX Europe sector index .XEX, which includes major European shares, advanced 1.8 percent.

All 10 S&P 500 sectors moved higher, but banks, which generally suffer whenever Europe fears surge, did particularly well. Wells Fargo was up 4.4 percent to close at $26.53, while Citigroup chalked up a gain of 2.9 percent to close at $31.42.

Trading had been choppy for most of the day after Berlusconi won a vote on the ratification of the budget, but he failed to obtain an absolute majority in the Chamber of Deputies, leading to calls for him to step down. The CBOE Volatility Index, Wall Street's so-called fear gauge, fell 7.9 percent and is down 8.7 percent so far this week. Yet, despite the decline in the VIX, it remains likely that the recent volatility will persist.

Equities traded erratically until Juergen Stark, a member of the European Central Bank's Executive Board, gave an optimistic timeline for when the crisis might be resolved. Wall Street then staged a late rebound to end higher.

An S&P Energy Index rose 1.4 percent, while the Dow Jones Transportation Average, which is regarded as a barometer of demand, climbed 1.2 percent. A semiconductor index .SOX added 0.6 percent.

With little on the economic calendar this week and earnings season drawing to a close, investors' attention was fixed on Europe. According to Thomson Reuters data, among the 442 S&P 500 companies that have reported earnings so far, 70 percent have exceeded expectations.

Trading on Wall Street has been closely tied to the euro's fortunes while volatility has been tethered to sovereign debt. The euro hit a session high against the dollar ahead of the Italian vote.

In corporate news, an experimental antidepressant from AstraZeneca and Targacept failed to meet the goal of changing a key depression rating score in the first of a series of pivotal clinical trials. Targacept saw its share price fall 60.2 percent to $7.61.

Rockwell Automation's quarterly earnings and 2012 outlook exceeded analysts' estimates, sending its shares up 6.5 percent to $74.33.

Volume was light, with about 7.13 billion shares changing hands on the major equity exchanges, a number that was well below last year's daily average of 8.47 billion shares.

Job Picture Continues to Show Slow Improvement

The number of people leaving or receiving jobs picked up in September, the Labor Department reported Tuesday, a sign that that the labor market may be improving. Both hires and separations have been relatively stagnant in the last year, with companies too nervous to hire or let anyone go, and employees too frightened to leave their jobs. Layoffs in particular had reached record lows earlier this year. However, both rose in September.

While a rise in separations, at least, may not sound like welcome news, it means that companies and workers are finally more willing to start making decisions again. Uncertainty about the state of the economy had largely frozen both hiring and firing, and without people leaving their jobs, companies had nobody to replace with new workers. Greater churn in the job market now potentially means more opportunities down the line for the 14 million unemployed workers sitting on the sidelines.

The turnover is still not as great as it was before the recession began, however, when the population was also smaller. Particularly promising is that the number of quits — that is, workers who voluntarily left their jobs, as opposed to being fired or laid off — rose in September, reaching its highest total since November 2008. That probably means that workers finally feel more confident that they can find new work if they are unhappy with their current position.

The best news was in job openings, which was at its highest level since August 2008, the month before Lehman Brothers failed. That also helped bring down the number of jobless workers per opening to 4.1, which, while still historically high, is far better than its peak of 6.9 unemployed workers per opening in July 2009.

The main continued area of concern in the Labor Department’s report was the disconnect between job openings and hiring. There has been decent growth in the number of job openings since the recovery officially began, with openings up 38 percent since June 2009, but growth in the number of hiring has been very slow, up only 17 percent.

It’s not clear what to make of this. The disconnect could be due to a skills mismatch — that is, workers don’t have the skills that employers are looking for. Or it could just be a sign of continued hesitation among employers, who are waiting for the recovery to pick up more speed before they commit to filling an opening.