EmailThe S&P 500 reached a record high yesterday in a trade that looked oh-so-familiar. Stocks dipped early, but that dip was bought in spite of an oh-so-familiar, weak economic report for April that came in the form of the Chicago Purchasing Managers Index.
The latter report of course helped the case for furthering the Fed's current policy approach. The same could be said for the Consumer Confidence report for April, too. It was better than expected at 68.1, yet that reading still trails the level for consumer confidence seen in 2008 before the Bear Stearns episode. So, consumer confidence may be up, but it isn't high.
Another report furthering the case for the Fed to stay the course was the ADP Employment report released today. It showed that 119,000 private sector jobs were created in April. That is an okay, but ultimately insufficient, number to make a major dent in the unemployment rate absent a drop in the labor force participation rate.
Hiring was led by small businesses (+50,000), followed by large (+43,000) and medium-sized (+26,000) businesses. The services sector, meanwhile, accounted for nearly all of the new jobs added (+113,000).
The Briefing.com consensus expected the ADP Employment change to show an increase of 155,000 positions. That means the April report qualifies as a disappointment; and it was made worse by a downward revision to March payrolls from 158,000 to 131,000.
The ADP report has not set a hopeful barometer for Friday's nonfarm payrolls report, which is currently expected to show an increase of 166,000 positions on nonfarm private payrolls.
This is all a perfect segue to a mention of today's FOMC meeting. We don't really need to say much. The Bernanke Fed is data dependent and focused on meeting its dual mandate of maximum employment and price stability. The labor market gauges of late and the 1.0% year-over year increase seen in the PCE Price Index on Monday all but ensure today's directive will be an oh-so-familiar read.
The market seems to know as much based on its most recent performance and given that the S&P futures are signalling a relatively flat start today despite the ADP disappointment.
Before we forget, there have been a lot of earnings reports since yesterday's close. They produced an oh-so-familiar theme of beating on the bottom line and missing on the top line.
Dow component Merck (MRK) is today's poster child on that front, having beaten the Capital IQ consensus estimate by six cents on revenues of $10.67 bln (consensus $11.09 bln) that were down 9.0% from the year-ago period. Merck also issued FY13 EPS guidance below the current consensus estimate.
Mastercard (MA), Viacom (VIA.B), Time Warner (TWX), Comcast (CMCSA), Devon Energy (DVN), and Coventry Health (CVH) all topped earnings estimates. All of them also fell short of their Capital IQ consensus revenue estimates.
Separately, the ISM Index for April (Briefing.com consensus 51.0; prior 51.3) will be released at 10:00 a.m. ET. It is always a focal point, but it is due to draw some added interest given the weaker-than-expected PMI report out of China last night.
If the ISM number is good, the market could rally. If the ISM number is bad, the market could rally. That's because the market's oh-so-familiar view of things is that good news is good news and bad news is good news so long as the Fed is purchasing and not tapering.
