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Wall Street extends rally

The main US stock indices are close to highs for the day heading into the close in New York.

The steepness of the sell-off in stock prices that began the week was the first time in a long, long while that there was an edge of panic to the market, with abrupt declines across the board regardless of quality, but the picture looks considerably brighter just a few days later, as a bit of calm returns, perhaps a little perspective. With hindsight Monday’s sharp drop looks like a bit of a knee-jerk reaction to the weak ISM manufacturing index result.

Tuesday’s resulting bounce never looked that convincing, but today’s rebound has been strong and feels a lot more credible, with stocks extending their gains late in the afternoon in New York to session highs: the Dow rose 1.15% or 177 points to 15,617, while the S&P 500 gained the same percentage to 1771.9. The gains have been broad, and things looks promising from a technical perspective, with the S&P 500 closing above the key 1750 level yesterday and now looking like it may regain a close above 1770.

Tomorrow we have the vitally important non-farm payrolls reports. Always important because of its timeliness and strong correlation to GDP, January’s payrolls have taken on even greater importance because of the surprising weakness seen in December’s report, with many dubious about the reliability of that previous number and expecting a large revision tomorrow.

A Reuters poll of analysts shows a consensus estimate of 175,000 for January’s non-farm payrolls and an unchanged unemployment rate of 6.7%, but it may be the revised figures for December that prove to be as important as anything else.

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