U.S. economic news was unremarkable overall. ADP Employment data disappointed missing for the 6^th time in 9 months (118K vs 125K expected & prior 158K). Productivity increased (2.9% vs 2.8% expected & prior 1.9%) but costs fell (-1.9% vs expected -.9% & prior -0.1%), meaning wages took a hit again. Factory Orders declined 0.8% vs -0.1% expected & prior 4.8%). ISM Non-Mfg Index 53.7 vs 53 expected & prior 54.2) but within the data the employment number plunged to 50.3 from 54.9—it’s this under the hood stuff the media and algos don’t pay attention to.

In overseas markets the focus was squarely on China where there was “talk” of more “potential” infrastructure spending along with easing rules allowing insurance companies to invest in banks. Stocks there rallied sharply (+2.9%) shifting the focus away from the fiscal cliff to more growth from China. Of significance down the road India’s congress passed a bill allowing foreign retailers to open stores in the country—hello Wal-Mart (WMT).

Not that it mattered to U.S. stock bulls much Wednesday but Spain was unable to sell the €4.5 billion in bonds Wednesday with only €4.25 billion placed. Also the eurozone reported its ISM Non-Mfg Index down for the 10^th straight month as much of the region lingers in recession—no matter stocks rose. Also, Greece was downgraded to CCC by S&P after it is now in “selective default”. I guess this is bullish as well.

Gold (GLD) prices continued their decline falling modestly. As you might remember from Monday’s heavy selling there was one large seller in Tokyo mid-day which drove prices sharply lower. We learned today, Goldman Sachs has suggested to clients to sell gold. Could it be GS was that seller in Tokyo? What a shock, eh? Meanwhile the dollar (UUP) rose while commodities (DBC) overall were mostly flat. Growth in China and perhaps repair damage from Sandy affects demand for copper (JJC) and other base metals (DBB) benefited.

Overall, U.S. stocks were led by financials (XLF), banks (KBE), and insurers (KIE) as money continues to rotate from tech. Large banks as primary dealers love POMO and use proceeds for trading. It might be the Fed will put POMO on steroids if we go over the cliff. Tech (XLK) continues to suffer as heavyweight Apple (AAPL) leads selling. Bonds (TLT) remained only slightly weaker on the day. Citigroup (C) announced it would fire 11,000 workers and the stock rose.

Are financials then the safe place to be with the fiscal cliff? Good question as Deutsche Bank is being accused of hiding more than $12 billion in losses to avoid bailout. Wow!

Volume was higher but breadth overall per the WSJ was mixed to flat.

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