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March 31, 2010 at 14:58 PM EDT
Wall Street Report: ADP, Chicago PMI, Factory Orders
wall street report adp chicago pmi factory orders
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Wall Street Report

Wall Street, the GreekWednesday's Wall Street Report brings the first of the monthly employment data points. Unfortunately, ADP did not serve to sweeten our coffee today, with a decrease in private employment payrolls noted. Still, good news arrived from the manufacturing sector, serving as a surrogate sweetener.

ADP Private Employment Report

ADP produced its Private Employment Report this morning, a precursor to Friday's big government roll call. The data for March offered a bit of disappointment, as private nonfarm payrolls dipped by 23K. Economists see an overall increase for March of 200K, and so some reason for concern enters the picture. Now, the government figure will take into account the massive hiring of census workers, something "private" employment does not measure. This offers the market comfort with regard to the monthly data, but no solace with regard to the ongoing health of the labor market post census work. February's data was revised down 4,000 to a decline of 24K jobs. Despite the negative points made above though, these results still represent the least significant monthly job losses since February of 2008.

Mortgage Activity

Mortgage activity is picking up around new home purchases, a clear indication of the impact of the First-Time Homebuyers Tax Credit. For the week ended March 26, the Market Composite Index of mortgage activity gained 1.3%. Purchase activity improved by 6.8% against the prior week, while the Refinance Index slipped 1.3%. The same thing occurred last week, as real estate agents have begun promoting the tax incentive deadline. The deadline to qualify for the tax break requires entry into contract by April 30, so expect activity to intensify over the rest of the month. Contracted 30-year and 15-year fixed rate mortgage rates rose to 5.04% (from 5.01%) and 4.34% (from 4.33%), respectively.

Chicago PMI

While the Chicago Purchasing Managers Index offered another positive economic indicator, the index at 58.8, missed economists' expectations for a more robust 61.0 (based on Bloomberg's survey). New Ordering activity remained strong, with that component index marking its sixth consecutive month above 60, at 61.8. Production was also reported strong, at 60.5. Most importantly though, inventories finally climbed over the 50 mark (break point for economic expansion), reaching 52.4. Measurable employment gains could follow suit if inventory restocking is not overdone, and is met by increasing consumption. That's a big if though...

Factory Orders

Factory Order growth exceeded expectations in February, growing by 0.6%, versus the economists expectation for a 0.4% gain. Also, January Orders were revised higher to +2.5%, from an initially reported 1.7% gain. Strength was seen in Durable Goods Orders, offering positive signal for the broader economy. Durable order growth amounted to 0.9%, while nondurables rose 0.3%. Gains in durables are greatly impacted by aircraft and defense orders, but also include machinery and heavy equipment, which indicates business investment. Capital Goods Orders, in fact, rose 2% in February. This implies underlying demand on the consumer level, albeit perhaps Asia assisted.

EIA Petroleum Status Report

This weekly measure of oil and distillate inventory levels showed a 2.9 million barrel increase in crude oil stocks in the week ended March 26. Total motor gasoline socks increased by 0.3 million barrels. Distillate fuel inventories, including heating oil, decreased on colder weather in the Northeast. Crude oil and gasoline stores are above the upper limit of the average range for this time of year, which is of course due to the still relatively weak global demand match to production levels. The strengthening dollar has acted to cheapen commodity prices, but after the EU words of support for Greece last week, a wall may lie ahead for the dollar. Also, demand is rising again. In other words, I see higher oil and commodity prices ahead.

Besides all this, Israel has been acting shady, with Netanyahu visiting President Obama quietly and also seeing Medvedev recently. We may be on the brink of war; and trust that the day before war on Iran breaks loose will be much different than what occurred in Iraq. There will be no public notice; no deadline will be issued to Iran with US troops poised on the border. No, it will be swift; it will be strong; and it will be secret.

Federal Actions

The Federal Reserve stops buying mortgage-backed securities today, beginning the unraveling of stimulus. Atlanta Federal Reserve Bank President Dennis Lockhart discussed the economic outlook at a meeting in Hartford, Connecticut. Fed Governor Elizabeth Duke discussed "returning credit to communities" in Arizona.

Corporate News Drivers

Wednesday's confirmed EPS report schedule includes news from: A. Schulman (Nasdaq: SHLM), Acuity Brands (NYSE: AYI), Aehr Test Systems (Nasdaq: AEHR), Air Transport Services (Nasdaq: ATSG), Alloy (Nasdaq: ALOY), AngioDynamics (Nasdaq: ANGO), A-Power Energy Generation (Nasdaq: APWR), Birner Dental Management Systems (Nasdaq: BDMS), BPZ Resources (NYSE: BPZ), Cascade (Nasdaq: CASC), China Agritech (Nasdaq: CAGC), China Grentech (Nasdaq: GRRF), Craft Brewers Alliance (Nasdaq: HOOK), DemandTec (Nasdaq: DMAN), DollarGeneral (NYSE: DG), Emrise (NYSE: ERI), Energy Focus (Nasdaq: EFOI), Entech Solar (Nasdaq: ENSL), Flotek Industries (NYSE: FTK), Global Payments (NYSE: GPN), Glowpoint (Nasdaq: GLOW), Immucor (Nasdaq: BLUD), Inuvo (Nasdaq: INUV), Lindsay Corp. (NYSE: LNN), Micron Technology (NYSE: MU), Mobile Telesystems (NYSE: MBT), NexMed (Nasdaq: NEXM), NN Inc. (Nasdaq: NNBR), Northern Dynasty Minerals (AMEX: NAK), OMEROS (Nasdaq: OMER), Research in Motion (Nasdaq: RIMM), Resources Global Prof. (Nasdaq: RECN), Response Genetics (Nasdaq: RGDX), Rite Aid (NYSE: RAD), Sino Gas (Nasdaq: SGAS), SinoHub (AMEX: SIHI), SmartHeat (Nasdaq: HEAT), The Mosaic Co. (NYSE: MOS), UniFirst (NYSE: UNF), ViewCast (Nasdaq: VCST), WidePoint (AMEX: WYY) and Xyratex (Nasdaq: XRTX).

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