Wake Up Call - The Big Payback

The purpose of "Wake Up Call" is to provide you with the market-moving news of the day, hand chosen, with value-added original commentary.

The godfather of soul was born on this day, lost to us recently and may he rest in peace, James Brown. All major U.S. indices have opened modestly higher this morning, on a good report from the Labor Department. Most importantly, unit labor costs of production rose only modestly in the first quarter, while weekly jobless claims came in below expectations. This seems to give hope to the possibility of labor strength without labor price pressure. Wall Street Greek views this positively, but sees other price pressures in food, energy and basic commodities that should continue to provide inflationary pressure and handcuff the Fed in a recessionary environment. Despite international demand for American products, we maintain concern about the American consumer, the pillar of strength for our economy, in light of tightening credit standards and liquidity. We were enthused to find last night that Jim Cramer shares our viewpoint. We also continue to favor large multinationals and domestic defensive plays in this environment.

Asia:
Hang Seng Index +1.44%; Shanghai/Shenzhen CSI 300 NA; NIKKEI 225 NA; S&P/ASX 200 +0.13%; Taiwan TAIEX +0.3%; BSE SENSEX 30 +1.48%; KRX 100 +0.33%; Ho Chi Minh +0.21%

U.K., Europe & Middle East:
DJ STOXX 50 Index +0.41%; FTSE 100 +0.68%; CAC 40 +0.21%; DAX +0.24%; Russian RTS Index +0.84%; ASE General -0.15%; Tel Aviv 25 +0.46%; Tadawul All Share -0.55; DFM General +0.19%

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

• *** Today's Labor Department report provided a basket of good news. It showed weekly initial jobless claims below forecasts, at 305,000. Most importantly, the Labor Department reported first quarter productivity improvement and a small increase in unit labor costs. Productivity slipped some from Q4, but the decreased rate of growth in labor costs will catch the focus of the market, in our view.
• *** Tonight provides broader America with a first look at the presidential candidates on the Republican side. I know it's a mistake to make any kind of political comment here, but I view myself as a modern American, with views that cross party lines. Still, I'm a good analyst, and very intuitive in predicting all types of things. Whether it's measuring the character of a CEO or just knowing the Philadelphia Phillies would be contenders in the Spring of 1993, I'm just good at it. Mitt Romney is your next president, and I think you'll see why tonight. He has the charisma and likability Americans desire. I think he is an honest, good person, and I believe America will elect him. He seems to me, the kind of man Americans will trust and want to lead them. Most importantly, he expresses a certain skill that is scarce in this country today, flexibility and a willingness to listen and incorporate knowledge into an open, always developing policy. I don't care if he is a democrat or a republican, he's my kind of guy. I hope I don't lose half my readers on this viewpoint, but if you are so close minded, best wishes. Watch the debate for yourself, and I think you will understand what I mean.
• *** GM sold a big stake in its GMAC unit just in time, but supbrime still bit the automaker this quarter. We warned recently that credit issues appear to be spreading, and this is more evidence of that. It's not just default we need to be concerned about, it's liquidity as well.
• *** The reach of subprime is extending, and has led UBS to shut down a hedge fund. Wall Street Greek asks, how many other hedge funds are there out there without the liquidity of UBS that may find troubled waters.
• *** Earnings season rolls on.
• *** Kidnappings in Nigeria support oil and provide news for scare tactics, but have a relatively insignificant impact on production. However, it reminds us of the will and potential that exists for Nigerian rebels to do more significant damage.

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