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Proprietary Trading Weekly Market Recap For Friday, Nov. 8, 2013

Stocks Surge, Dow Captures All-time High

The past week was a wild ride for proprietary trading of equities as momentum changed pushing many of the high flying nasdaq stocks lower. Economic data in the US was stronger than expected throughout the week with ISM services, GDP, jobless claims and non-farm payrolls all coming in better than expected. The next wall of worry for investors to climb is the timing for the Federal Reserve and when the central bank will begin to taper its bond purchase program. Also of note was the surprise interest rate cut from the ECB which could continue to perpetuate driving European stocks prices higher.

On Thursday, the ECB cut its benchmark refinance rate used by banks to lend to one another, to 25 basis points from 50 basis points. The periphery of Europe desperately needs a reduction in the value of the Euro exchange rate to spur growth, and a cut in rates will go a long way toward reducing the attractiveness of the Euro.

On Thursday the Commerce Department release Q3 Gross Domestic Product. According to the Commerce Department, GDP increased by 2.8% better than the 2% expected by economists. Some of the internals to the number though were much weaker than expected. Consumer spending, which accounts for approximately 70% of growth, grew at 1.5%, matching the slowest pace of growth in more than 3½ years. While consumers stepped up spending on long-lasting items such as cars, they slowed spending on services. Overall investment across the economy grew 9.5% after rising 9.2% in the second quarter, largely reflecting strength in the housing sector.

The personal consumption expenditures index which is used as the main guideline for inflation grew 1.9%. The core inflation rate grew 1.4%. That indicates underlying inflation remains below the Fed's annual target of 2%, and leaves the FOMC with the flexibility to continue to purchase fixed income products for quantitative easing.

On Friday the Department of Labor released the October employment report. US non-farm payrolls came in at 204,000 much bigger than the 120K expected by economists, versus the 150,000 reported in September. The unemployment rate ticked up to 7.3% compared to 7.2% in September. The labor for participation rate dipped to 62.8% compared to 63.2% which is the lowest in the past 25 years.

September non-farm payrolls was revised and increased to 238K in August from 193K that was originally reported. September was revised to 163K to 148K in September. The BLS stated that the government shutdown accounted for approximately 450K jobs that were lost during October with regard to the household survey. The Bureau of Labor Statistics said the private sector added 212,000 jobs in October, the strongest gain since February.

The uptrend in the S&P 500 index remains intact, and will likely be driven by low interest rates and the idea that tapering will probably not occurs until 2014.