Today's Coffee - Recession, Not Depression Stupid!

Good day! Below, please find all the information you would normally find in "Wake Up Call" and "Today's Morning Coffee."

The Dow, S&P 500 and NASDAQ are all up today between 0.5% and 1.0%, driven by decent economic news, oil weakness and mostly positive earnings reports. The theme of our article today is basically that recession, an economic scenario that scares most, should not be mistaken for depression. While we anticipate consumer spending will slacken this year, as consumers find credit more difficult to come by, the good news is that international growth is supportive. Wall Street Greek believes that as long as the democratic majority in Congress does not seek to fight dangerous trade wars at the most inappropriate time, we will be better off. Now's not the time guys! We are not advocates of the illegal trade behavior of China, but we suggest continuing to turn a blind eye for now, at least until economic growth is more stable and inflation is tame.

Our value-added take on today's key news:

• *** ADP reported private employers likely added 64,000 jobs in April, short of consensus expectations for an increase of 100,000. April's growth is also down from March's reading of 98,000 additions (revised). Also, April brought down the three month moving average, to 76,000. (We add some of our own flavor further down the article, under Economic Data & Analysis)
• *** Mortgage applications ticked up this past week, despite slippage from refinancings on a slight rise in mortgage rates.
• *** Factory orders rose 3.1% in March, greater than expected, and above February's 1.4% growth.
• *** Earnings season rolls on. See the Yahoo! report schedule here.

OVERSEAS MARKET ACTIVITY

Asia:

Hang Seng Index +0.34%; Shanghai/Shenzhen CSI 300 NA; NIKKEI 225 +0.69%; S&P/ASX 200 +1.5%; Taiwan TAIEX +0.35%; BSE SENSEX 30 NA; KRX 100 +0.7%; Ho Chi Minh +1.25%

U.K., Europe & Middle East:

DJ STOXX 50 Index +0.34%; FTSE 100 +1.01%; CAC 40 +0.5%; DAX +0.64%; Russian RTS Index -1.23%; ASE General +0.82%; Tel Aviv 25 +0.77%; Tadawul All Share -0.55%; DFM General -1.01%

International markets were mostly higher today, while the major oil producers showed weakness. The troubled Turkish market found some solace from news of an early election. The ISE National 100 Index rose 1.67%.

ECONOMIC DATA & ANALYSIS

Today's ADP employment report, showing private sector job growth below March is welcomed news if it proves a useful predictor of Friday's Employment Situation Report. You should recall that last month's employment report showed an increase of 180,000, growth viewed too hot by most and worrisome by the Fed. While low unemployment is a good thing, the Fed's concern is that it could drive increasing labor costs and fuel inflation. Thus, today's ADP report is welcomed news. Wall Street Greek expects unemployment to move back up to 4.5%, but we do not expect employment pressure to ease enough to allow the Fed freedom to lower rates.

Mortgage applications edged higher this past week, while the purchase index rose at a decent clip. Rates increased during the week, so refinancing decreased and almost negated a 4.0% increase in the purchase index. The data is seasonally adjusted, so you would think this is very good news, but we suspect there was some pent up demand that fed into this strength, due to April's abnormally cold weather. We do not see a recovery in housing just yet, so don't get too excited by this figure.

Factory orders rose 3.1% in March, ahead of expectations and above February's level. Our economy is service sector driven, and factory orders are likely also benefiting here from sales overseas. Remember, with the dollar getting cheaper, American goods are cheaper for foreigners to purchase overseas. This strength does not speak much of the American consumer's willingness to spend, in our view, especially given yesterday's auto sales data. This independent equity research provider views consumer spending as the most critical data to follow now. Factories may be churning out product, but who is buying we ask. I believe the American consumer is going to buy less this year, as capital becomes harder to come by and rates hold up under the foundation of persistent inflation. So you see, recession does not translate to depression. GDP could weaken, while Americans push forward and survive. I would call your democratic Congressmen and tell them to hold off on their trade wars, because we need international market demand now more than ever.

COMMODITY MARKETS

Petroleum inventories were reported this morning, and most of the data was in line. Oil inventory built up, while gasoline continued to draw and refinery capacity utilization rose. There are several factors at play confusing oil prices for now. With U.S. economic growth slowing, we would normally see oil move lower, but global growth is an offsetting factor, especially within China. Increasing refinery usage should draw more oil than normal, further boosting the price. OPEC is not helping matters, as it views the supply adequate. OPEC is not scheduled to meet again until September, and it seems that barring any unexpected catalyst, it will wait until then. So, we are going from short term bear on oil prices, due to American economic weakness, to seeing a range bound trade here from $60 to $65. Further news of a weakening U.S. economy should move oil lower in the future, and we would look to consumer, employment and service sector data to prove important in measuring that future. Worth noting, however, an early hurricane would pressure prices higher. Future gasoline inventory data will prove critical as well, as we need to see rising capacity utilization translate into inventory build before the summer driving season kicks off four to six weeks from now. Crude is down a little over 1% today on the report, and gasoline is lower by 1.6% as the market seems to anticipate future benefit from capacity usage increase.

News of a feed recall, related to the same Chinese wheat gluten that caused the recent pet food scare, is likely going to pressure poultry, feed and other protein prices higher in the near future, by our view. However, it looks like the price shock will be short lived. Still, poultry producers like Pilgrim's Pride (PPC) and Tyson Foods (TSN) have been impacted by rising feed costs. As they push price rise through to American consumers, it's just one more burden to bear.

STOCK SPECIFIC NEWS

Wednesday's earnings reports include AGCO (AG), Aqua America (WTR), Applebee's International (APPB), Barrick Gold (ABX), Biogen Idec (BIIB), Blockbuster (BBI), Cal Dive (DVR), CIGNA (CI), Clorox (CLX), Credit Suisse (CS), Devon Energy (DVN), Haemonetics (HAE), MasTec (MTZ), Sprint Nextel (S), Tetra Tech (TTEK), Teva Pharmaceuticals (TEVA), Transocean (RIG), ValueClick (VCLK) and more.

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