This Week: GM Dead, Jobs Trouble Ahead

Visit the front pages of Wall Street Greek and Market Moving News to see our current coverage of economic reports and financial markets.

A busy week is under way, as the economic slate started heavy and finishes with a bang. Read on, because I suspect the confused marketplace will have reason to move before the close of trading this week. Unfortunately, you're not going to like the direction I see for the short-term.

(Tickers: GM, MWW, JOSB, ALTR, AINV, ENS, DIA, SPY, QQQQ, NYX, DOG, SDS, QLD, XLF, IWM, TWM, IWD, SDK, RHI, KFY, MAN, TOL, HOV, CPRT, WMT, MATK)

This Week

Monday

We covered Monday in a premarket article you can see via this link.

Tuesday

It would be a miracle if Motor Vehicle Sales improved during a period when Chrysler was newly bankrupt and GM moved towards it; I'm talking about May. Despite the government's warranty guarantees, consumers remained in no shape to splurge last month, and who would, with the car-makers falling by the way side. Economists surveyed by Bloomberg forecast domestic vehicle sales of 7.0 million for May, compared against the 6.9 million posted in April. We would expect less than that, given the aforementioned obstacles. The median of surveyed economists' forecasts seems to sit just below last month's tally of 6.9 million, and likewise appears to us better reflective of reality this time around.

Tuesday offers the regular Weekly Same-Store Sales Report from the International Council of Shopping Centers. We called the prior week's recovery correctly. Recall, our point was that at some point sales must bottom based on population growth and consumption needs alone. We think that bottom has been reached.

We have taken note of market noise that warns of pending tougher comparables due to last year's tax give away. The greater point to make would be the significantly deteriorated employment situation though, and that has not even delayed stabilization. I argue here that what is playing a big role in consumer spending stabilization is the fact that the nation is no longer discounting the end of the world into their consumption habits (similarly to how it's allowed the market to recover to a more defensible level). In other words, all those folks who still have jobs and homes, but who also stopped spending and lived on canned beans and tuna like me, have ventured out into the sunlight again. I'm still in my cave though; rescue me please!!!

ICSC Weekly Trend

Week Ending

Weekly Change

Yearly Change

May 23

+0.8%

+0.5%

May 16

-1.2%

-0.3%

May 9

+0.3%

+0.5%

May 2

+0.3%

+0.5%

April 25

-0.7%

-1.7%

April 18

-0.4%

-0.1%

April 11

+0.8%

-0.4%

April 4

+0.6%

-0.3%

Pending Home Sales will be reported at 10:00 a.m. on Tuesday. There have been signs of stabilization of late, and this measure of contract activity within the existing home market stands good chance for improvement. Existing Home Sales were reported for April just last week, and those gained on the month. However, they gained on revised lower previous month data. If we can believe the National Association of Realtors (questionable), then repeat home buyers are actually returning to the market and even bidding up foreclosure property prices. Despite my natural skepticism, I actually believe it this time... Douville, what say you?

Dallas Federal Reserve President Richard Fisher is scheduled to speak on the topic of the global economy. The earnings slate highlights news from Alloy (Nasdaq: ALOY), Applied Signal (Nasdaq: APSG), Aries Maritime (Nasdaq: RAMS), Blue Coat Systems (Nasdaq: BCSI), Bob Evans Farms (Nasdaq: BOBE), Daktronics (Nasdaq: DAKT), Financial Federal (NYSE: FIF), hhgregg (NYSE: HGG), Hovnanian (NYSE: HOV), Layne Christensen (Nasdaq: LAYN), Mitcham Industries (Nasdaq: MIND), Modine Manufacturing (NYSE: MOD), United Natural Foods (Nasdaq: UNFI) and VeriFone Holdings (NYSE: PAY).

Wednesday

For those of you familiar with street drag racing (which is illegal so shh!) and the tricks of the trade, we will hit the nitrous button on Wednesday for a spurt of economic hyperactivity that will run through the remainder of the week. Even before the market open on Wednesday, three reports will greet us bright and early.

That familiar monthly parade of employment data starts off with the Challenger Job-Cut Report at 7:30 a.m. Challenger, Gray & Christmas, Inc. tracks announced corporate layoffs. This report is first, most likely because it would otherwise have little pull while mixed in with the rest of the employment reports. Last month, Challenger showed 132,590 layoffs for April, which compared against the 150,411 announced in March.

At 8:15, ADP publishes its Private Employment Report, which measures changes in private employment within industrial sectors. It's the precursor to the government's Employment Situation Report published two days later. Last month's release showed a loss of 491K nonfarm payrolls in April.

The news flow continues heavy after the opening bell, with two more economic reports due at 10:00 a.m. Look for Factory Orders, with Bloomberg's consensus of economists forecasting a 1.1% rise in April, compared to the 0.9% drop in March. ISM produces its Non-Manufacturing Report at the same time. Economists see its Composite Index reaching 45.0 for May, versus the 43.7 level seen in April. ISM's Manufacturing data was reported improved on Monday of this week, but readings short of 50.0 still signify a recessionary environment, or rather that expectation by industry participants. Also at 10:00 a.m., Federal Reserve Chairman Bernanke will testify before the House Budget Committee on the economy and financial conditions.

Look for the regular EIA Petroleum Status Report at 10:30 a.m. Last week's data showed crude oil inventories decreased by 5.4 million barrels, and OPEC decided to keep production quotas unchanged as it targets a price above $75 for oil. Kansas City Fed President Thomas Hoenig addresses a group in Wyoming in the afternoon.

The earnings report schedule includes news from a few of "The Greek's" old favorites, Toll Brothers (NYSE: TOL) and Martek Biosciences (Nasdaq: MATK). The schedule includes ADC Telecommunications (Nasdaq: ADCT), Amerco (Nasdaq: UHAL), Collective Brands (NYSE: PSS), Comtech Telecommunications (Nasdaq: CMTL), Copart (Nasdaq: CPRT), Cyberonics (Nasdaq: CYBX), Dynamex (Nasdaq: DDMX), DynCorp Int'l (NYSE: DCP), G-III Apparel (Nasdaq: GIII), Gander Mountain (Nasdaq: GMTN), Greif Brothers (NYSE: GEF), Joy Global (Nasdaq: JOYG), LTX-Credence (Nasdaq: LTXC), Mechel Open Joint Stock (NYSE: MTL), SAIC, Inc. (NYSE: SAI), Shanda Interactive Entertainment (Nasdaq: SNDA), Williams-Sonoma (NYSE: WSM) and more.

Thursday

A very busy day is in store for Thursday as well. The employment data parade proceeds on Thursday with the early morning reporting of the Employment Index from Monster Worldwide (NYSE: MWW). Monster's measure of online job demand (from the employer's perspective) is basically replacing print as the main place people look for jobs. Thus, it is increasingly becoming a more important metric. Last month's data showed the MEI moved to a level of 120 in April, from 118 in March. We suspect the metric will shed a point or two this time around, if it does not stick at the current mark, as temporary and part-time work serve to stabilize the supply of overall employment opportunities.

At 8:30, the regular Weekly Jobless Claims Report is expected to show new benefits filers at 620K, compared against the prior week's 623K mark. We often highlight the fact that economists' consensus does not stray very far from the prior week result here. It's a simple matter of safe forecasting (or logic), and has much to do with the likelihood that a similar flow of job loss will persist from one week to another, considering the short time span in between.

The Department of Labor will also produce its Productivity and Costs Report at 8:30 on Thursday. Both metrics have likely benefited of late due to favorable revision. With capacity lighter and hours still softening, any positive change in economic activity (even from bad to less bad) allows for improved Productivity and Unit Labor Costs. Economists forecast a revision of Q1 Productivity to +1.2%, from +0.8%, and Unit Labor Costs to +2.8%, from +3.3%, due to the recent favorable adjustment to Q1 GDP.

Federal Reserve Messengers Bernanke, Pianalto and Dudley will each address regional audiences in a sort of Fed parade of their own. The Fed will also report on the state of its balance sheet at 4:30 p.m. On the other side of the pond, central bankers at the Bank of England will announce their latest monetary policy decision. Also, the ECB is expected to get into more detail about its extraordinary economic stimulation efforts. The regular EIA Natural Gas Report is due at 10:30.

Retailers will mostly report May Chain Store Sales on Thursday. However, Wal-Mart (NYSE: WMT), the nation's critical retailer, recently decided against offering monthly updates. The day's EPS slate includes ABM Industries (NYSE: ABM), Analogic (Nasdaq: ALOG), Bio-Reference Laboratories (Nasdaq: BRLI), Cantel Medical (NYSE: CMN), Cascade (NYSE: CAE), Ciena (Nasdaq: CIEN), Conn's (Nasdaq: CONN), CorVel (Nasdaq: CRVL), Guess (NYSE: GES), Jos A. Banks (Nasdaq: JOSB), KMG Chemicals (Nasdaq: KMGB), Krispy Kreme Donuts (NYSE: KKD), Medical Action (Nasdaq: MDCI), Navisite (Nasdaq: NAVI), SeaChange Int'l (Nasdaq: SEAC), Signet Jewelers (NYSE: SIG), Teekay Corp. (NYSE: TK), The Cooper Cos. (NYSE: COO), Ulta Salon (Nasdaq: ULTA), Uroplasty (AMEX: UPI), UTI Worldwide (Nasdaq: UTIW), Vail Resorts (NYSE: MTN), Valence Technology (Nasdaq: VLNC), Wind River Systems (Nasdaq: WIND), Xinyuan Real Estate (NYSE: XIN) and more.

Friday

The close of the week will not offer a lazy day nor an opportunity to leave for the beach too soon. Nada! The Unemployment Disaster is due first thing Friday, affectionately known as the Employment Situation Report. Watching the unemployment rate rise into the harrowing heights of 9+% is akin to sitting in on one of these new movies telling the stories of tortured souls. Actually, it's exactly like that!

This latest horror story is expected to show unemployment at 9.2%. Tell me when to open my eyes! Okay, now's good, as the monthly change in nonfarm payrolls is expected to show one of those less bad numbers the market has recently fallen in love with. According to Bloomberg's survey of economists, the labor market should have shed about 530K jobs last month, which compares uncannily with last month's loss of 539K. Although plus 500K numbers use to scare the (your word here) out of us, it's now welcomed good news.

Look for a worse result folks, and a possible jump to an even higher unemployment rate than forecast. I think we're going to get a negative surprise and reason for the market to reconsider recent gains. Ongoing unemployment claims have persisted in their ascension, and so I think economists are making a mistake here. And even if they are not, the talk of the town on Friday will be about the impact of auto market upheaval on the job market. The panicky crowd will scream of the tentacles of terror that reach through dealerships, suppliers and all other associated industries. Thus, even a good number will turn up skeptics who will warn of June's likely fright. We suspect the skeptics will begin turning up before Friday's data, so the decline I smell could start sooner.

At 3:00 p.m., we will receive the Consumer Credit Report, though most of you will be on your helicopter to the Hamptons by then (BTW: can I get a lift? and a bed? and some spending cash?). Economists see another contraction in consumer credit, this time by $7.0 billion. Credit contracted by $11.1 billion in March. This is an inevitable event, as credit card issuers come under regulatory pressure and face the reality of rising default rates... and the hangover from decades of free money is going to last a while.

The light EPS schedule includes news from Agilysys (Nasdaq: AGYS), American Woodmark (Nasdaq: AMWD), Exide (Nasdaq: XIDE), Oil-Dri Corp. of America (NYSE: ODC) and that giant of industry, Carphone Warehouse (Nasdaq: CPW).

Please see our disclosures at the Wall Street Greek website and author bio pages found there.