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A surprising surge in October payrolls suggested a U.S. economy running at two speeds with strength in the service sector offsetting weakness from a plummeting housing sector and gyrating credit markets.
 
Employers added 166,00 jobs in October, the Labor Department said, the most in five months. The unemployment rate remained unchanged at 4.7% despite widespread worries that the odds of a recession are rising.
 
Fridays report capped a week of conflicting signal. Earlier in the week, the government said the economy grew at a robust 3.9% pace in the third quarter, helped by surging exports. Yet consumer confidence fell, and a survey of purchasing managers suggested a loss of momentum for manufacturers.
 
The Federal Reserve cut its key interest rate by one-quarter percentage point this past week, citing its expectation that the economy will likely slow in the near term and signaled its reluctance to cut rates again. But even after the upbeat employment report, financial markets continue to anticipate another quarter-point rate cut in December.
 
Overall fundamentals of our analysis did not change significantly since the last week. We will keep our distribution at the same level, i.e. 50% in I Fund, 30% in S Fund and 20% in C Fund.