Wednesday, May 2, 2012

Markets slump as companies added few workers in April

Dow dropped 53, decliners over advancers 2-1 & NAZ was off 8.  Bank stocks led the selling, taking the Financial Index down 2+ to the 207s (where is was 4 weeks ago). 

The MLP index fell 1+ the 398s & the REIT index was off 1+ to the 261s.  Junk bond funds were mixed & Treasuries rallied, bringing the yield on the 10 year Treasury closer to 1.9%.  Oil dropped from a 5-week high as a report showed US employers added fewer jobs last month than forecast while inventories climbed.  Gold declined the most in 2 weeks after 3 voting members of the FOMC said they don’t see a need for more economic stimulus & physical demand slumped in India, the world’s biggest importer.

JPMorgan Chase Capital XVI (AMJ)

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CLM12.NYM...Crude Oil Jun 12...105.67 ...Down 0.49  (0.5%)

GCK12.CMX...Gold May 12......1,655.40 ...Down 6.30  (0.4%)

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ADP Says Companies in U.S. Add Fewest Workers in Seven Months

Line of jobseeks
Photo:   Bloomberg

In Apr, companies added the fewest workers in 7 months, indicating the job market may take time to strengthen.  Employment increased 119K following a revised 201K gain in the prior month, according to ADP Employer Services & sharply below the forecast of 170K. Companies may remain hesitant about expanding the workforce until they see more evidence that the gains in consumer spending, which accounts for 70% of the economy.  Over the previous 6 reports, ADP’s initial figure was closest to the Labor Department’s first estimate of private payrolls in Oct, when it overstated the gain in jobs by 6K & the estimate was least accurate in Dec, when it overestimated the employment gain by 113K.  Goods-producing industries, which include manufacturers & construction companies, decreased workers 4K in Apr & employment at factories declined 5K as did payrolls in construction.  But service providers added 123K workers.  Companies employing more than 499 workers added 4K jobs.  Medium-sized businesses, with 50-499 employees, took on 57K & small companies increased payrolls 58K, ADP said.  There is greater anxiety over the jobs report due on Fri.

ADP Says Companies Add Fewest U.S. Workers in Seven Months
  • A Volkswagen autoworker works in the chisel checks department at a plant in Chattanooga, Tennessee December 1, 2011. REUTERS/Billy Weeks
Photo:   Yahoo

New orders for US factory goods in Mar recorded their biggest decline in 3 years as demand for transportation equipment & a range of other goods slumped,  The Commerce Dept said orders for manufactured goods dropped 1.5% after a revised 1.1% rise in Feb, pretty matching the forecast for orders to fall 1.6% after a previously reported 1.3% increase in Feb.  While the report showed broad weakness in a sector that has carried the economic recovery, anecdotal evidence suggests factories continued to expand as Q2 started.  The Institute for Supply Management's index of national manufacturing activity climbed to a 10-month high in Apr, with a measure of new orders received by factories the highest in a year.  Orders for transportation equipment tumbled 12.6% in Mar on weak orders for civilian aircraft & orders for motor vehicles & parts were flat after rising 1% in Feb.  Factory goods orders excluding transportation were flat in Mar after rising 1% the prior month.  Unfilled orders at factories edged up 0.1% after rising 1.2% in Feb. Shipments of factory goods increased 0.7% after rising 0.1% the prior month, while inventories gained 0.3%.  Orders for durable goods, manufactured products expected to last 3 years or more, fell 4% instead of the 4.2% decline reported last week.  Durable goods orders excluding transportation were down 0.8% rather than 1.1%.  Orders for non-defense capital goods excluding aircraft dipped 0.1% in Mar instead of the previously reported 0.8% drop.  This is not encouraging news for an economic recovery.

Factory Orders in U.S. Decrease on Pullback in Aircraft

  • <p>               FILE- This Sept. 21, 2011, file photo. shows a MasterCard sign on a revolving door in New York. MasterCard said Wednesday, May 2, 2012, its first-quarter profit rose 25 percent on a big spike in card use overseas. Its net income was $682 million, or $5.36 per share, on revenue of $1.8 billion. (AP Photo/Mark Lennihan, File)
Photo:   Yahoo

Shoppers in Latin America, the Asia Pacific & the Middle East powered a 25% increase in MasterCard's profit for Q1.  EPS was $5.36 on revenue of $1.8B, beating expectations of $5.29 on revenue of $1.7B.  CEO Ajay Banga, said the number of purchases the company processed jumped 29%, the highest growth rate since the company went public.  MasterCard usage in the US grew 14% as people spent more in restaurants & on apparel, hardware & electronics.  Banga said that the US economy would have to do better for that growth to continue. "For this trend to continue for a sustained period of time, we're going to look for additional improvement in unemployment and a positive turn in housing prices," Banga said.  Recent intl acquisitions paid off, contributing to 25% profit growth. In the Asia Pacific, Latin America, Middle East & Africa, usage of its cards grew 23%.  In Q1 MA repurchased 652K shares at a cost of $248M & the company is authorized to repurchase another $556M.  MA increased rebates & incentives, a common practice in the industry.  In Q1 costs related to such incentives grew 24%, taking a bite out of revenue.  The stock dropped 11 to 444. 

Mastercard Incorporated (MA)

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Today's numbers were gloomier, raising concerns about the economic recovery in the US.  The numbers were on the low end of expectations, not good going into the big jobs report on Fri.  European factories sank further into decline last month, with the downturn hitting Italy & Spain hard & appearing to take root in France & Germany.  Gas at the pump averaged $3.86 yesterday, just a few pennies below the highs reached last month.  But the popular averages are only pocket change below their multi year highs.  I call that a disconnect.

Dow Industrials

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