The market felt much better in anticipation of better payroll numbers tomorrow as ADP employment Change numbers surprised on the upside.

The S&P stock index closed more than 1% higher while corporate credit traded better in both the cash bond and the CDS (credit default swap) space.

Rating agency Standard & Poor's revised the state of California's outlook to stable although this did not figure as much into market sentiment as the employment picture.

Corporate earnings start next week and the market is anticipating better earnings from the big firms that will be reporting.

The picture may be a little muddier for small and medium sized business enterprises.

If we get solid payroll numbers tomorrow, credit could grind tighter over the course of next week as players cover their shorts and others re-set longs.

Oil prices approached $99 a barrel and Treasury bonds sold off ahead of the payroll number; the yield on the 5 year is closing at 1.73%.

There were several questions from readers interested in why this player thought the market's attention might focus on Italy before Spain.

This analysis rests mainly on how players are positioned in the markets; too many countries are heavily vested in Spain.

Italy, although bigger, would have less direct impact on some of the vested countries than Spain.

As a result Spain is likely to get more support, direct and indirect, from the countries holding the purse-strings.

Sometimes these technical factors (how folks are positioned) matter much more than fundamentals.

Coincidentally Professor Altman of NYU published a piece in the FT making the same argument but basing his argument more on fundamentals such as higher interest payments etc; the piece is worth checking out

With the sell-off in Treasury bonds today, the corporate bond new issue machine cranked up.

There were several marquee deals with Bank of America selling $2 billion of 5 year debt at +205 and $500 million of 3 year FRNs (floating rate notes) at +155.

Canadian bank Toronto Dominion sold $1.25 billion of 5 year bonds at +85 and $500 million of FRNs.

In the sovereign space, the Republic of Brazil issued $400 million of Yankee bonds at +105 as it tapped into an existing 10 year facility.

Corporacion Andina de Fomento (an international financial institution that supports development across the Andean region) sold $400 million of 5 year bonds at +180 by tapping into an existing facility.

Stay tuned for tomorrow.