Stock Market Drivers 06-01-11

Wednesday's stock market drivers were concentrated in more soft economic data, especially from the United States. ADP offered a very low forecast for Nonfarm Private Payroll growth for May. ISM produced a Manufacturing Index that illustrated a significant slowdown in segment expansion. Across China, India and the United Kingdom, economic reports echoed the U.S. message for a softening manufacturing sector. This report offers more data on the global economy and corporate wire as well.

Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

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Stock Market Drivers

Debt Ceiling Politics
After soundly defeating a bill to raise the debt ceiling sans any tax cuts, House GOP members are off to the White House today to have a heart to heart with the President. Republicans are expected to demand trillions in spending cuts from the Obama Administration in exchange for consolation on the debt ceiling hike.

ADP Private Employment Data
ADP (NYSE: ADP) published its estimate today for a 38K private nonfarm payroll increase in May. It’s a miniscule increase, especially when compared to the still mediocre gain of 177K ADP saw for April. The Labor Department reports on total nonfarm payrolls and unemployment Friday. The DOL’s April report showed private nonfarm payrolls increased by 268K. This latest estimate is especially concerning, given recent economic red flags.

Challenger Announced Job-Cuts
Challenger Gray & Christmas’ tally of announced layoffs showed little change in May, with planned firings marking 37,135, up just slightly from the 36,490 declared in April. For the year-to-date, announced layoffs are down 21%.

US Manufacturing Lull
ISM reported its Manufacturing Index this morning, and it offered concerning data. The ISM’s Purchasing Managers Index fell 6.9 points to 53.5 in May. While a reading above 50 still signifies economic expansion, the deceleration of expansion is at this point clear and deep.

Global Manufacturing Lull
The U.K., China and India all reported slower manufacturing activity in May. The HSBC India Manufacturing Purchasing Managers Index eased to 57.5, from 58 in April. Two separate surveys in China, one government tally and the other produced by HSBC (NYSE: HBC), both showed a moderation of manufacturing expansion. Both China and India are attributing a controlled deceleration to inflation fighting efforts the two nations’ central banks have been engaged in. The U.K.’s CIPS/Markit Purchasing Managers Index posted its fourth consecutive drop in overall activity, and its New Orders Index dropped below 50 in May, marking contraction.

Construction Spending
The Census Bureau reported construction spending increased 0.4% in April, against a March revision. April spending was still 9.3% short of the prior year period. This year’s activity is weighed by lower public construction spending, down 7.5% against the prior year and 1.9% short of March. Total private construction was up 1.7% in April, though still down 10.3% against the prior year period. Clearly new home construction is mired by the heavy inventory flood of distressed properties that remains in the market.

Mortgage Activity
The Mortgage Bankers Association reported a 4.0% decrease in its Market Composite Index for the week ending May 27. The Purchase Index was about unchanged while the Refinance Index fell 5.7%, despite a drop in fixed mortgage rates.

Greece Gets Lift on German Comments
Berlin corrected a newspaper report that previously stated the IMF might not be committed to any future aid package for Greece. German officials said the IMF and EU were committed to together provide additional funding to Greece. A team from the EU, IMF and European Central Bank (ECB) are in Athens now deciding whether to release a tranche of 12 billion euros to Greece next month. It seems clear Greece will continue to find support for now.

Timothy Geithner is testifying today before the House Financial Services Committee on the state of the international financial system.

The Bank of Japan kicks off its international conference on monetary policy.

The International Council of Shopping Centers (ICSC) reported a 2.8% year-over-year increase in same-store sales for the May 28 ending period. Redbook noted sales increased 3.6% for the same period.

Corporate Wire

GM (NYSE: GM) reported its May US sales slipped 3.5% against the prior year, where economists were looking for growth. GM predicted the total US industry annualized sales rate for May should range from 12 to 12.1 million. Reuters reports economists were looking for about 12.6 million. GM shares are down more than 2% on the news.

Macy’s (NYSE: M) reported its same-store sales rose 7.4% in May, meeting the company’s own aggressive expectations. However, the shares are down a half of a percent today on its failing to satisfy a greedy market.

American Superconductor (Nasdaq: AMSC) shares are down 20% at midday, after the company delayed its 10K on its review of revenue from customers in China. Before the day started, the shares had shed 63% of their value year-to-date. The company said it would be reversing recognition of a material amount of revenue over several quarters of data.

Marathon Oil (NYSE: MRO) made a $3.5 billion acquisition of Texas located oil and natural gas fields. As of May 1 the fields were producing 7K barrels of oil equivalent per day, but Marathon expects to boost production to 80K per day by 2016.

Noble Energy (NYSE: NBL) reported an oil discovery in the deep water of the Gulf of Mexico. The project is the first to receive a permit since the disaster at the BP (NYSE: BP) rig. It’s kind of funny that NBL shares are down about 1.9% on the news. Perhaps the market would have preferred the project be a no go.

Sealed Air (NYSE: SEE) said it will buy Diversey Holdings for $4.3 billion. The deal takes SEE into commercial cleaning and sanitation businesses. SEE shares were down 3% on the news.

A New York court is holding a hearing today on Google’s (Nasdaq: GOOG) settlement with publishers over digitizing books; the court had rejected the settlement.

Presenting at the Sanford C. Bernstein Strategic Decision Conference: Dell (Nasdaq: DELL), Merck (NYSE: MRK), EMC (NYSE: EMC), American Express (NYSE: AXP), Bank of America (NYSE: BAC) and McDonald’s (NYSE: MCD). Cisco Systems (Nasdaq: CSCO) is presenting at the Bank of America Merrill Lynch tech conference (NYSE: BAC). Meeting investors or analysts today, AXA SA ADR (OTC: AXAHY.PK), Mark-West Energy Partners (NYSE: MWE) and Targa Resources (Nasdaq: TRGP). Splitting today, Church & Dwight (NYSE: CHD).

The corporate earnings wire includes Coldwater Creek (Nasdaq: CWTR), Esterline Technologies (NYSE: ESL), Jos. A. Bank Clothiers (Nasdaq: JOSB), NetQin Mobile (NYSE: NQ), American DG Energy (Nasdaq: ADGE), ATA Inc. (Nasdaq: ATAI), ChinaEdu (Nasdaq: CEDU), Copart (Nasdaq: CPRT), Daktronics (Nasdaq: DAKT), Dollar General (NYSE: DG), REX American Resources (NYSE: REX), Shanda Games (Nasdaq: GAME), Vera Bradley Designs (Nasdaq: VRA) and Vimpelcom (NYSE: VIP).

The day’s most active stocks include – Gainers – Westinghouse Solar (Nasdaq: WEST), Stream Global Services (AMEX: SGS), eLoyalty (Nasdaq: MATR), Rada Electronics (Nasdaq: RADA), iPath Short Extended Russel 20 (NYSE: RTSA), First Capital Bancorp (Nasdaq: FCVA), KV Pharmaceutical (NYSE: KV-B), Telvent (Nasdaq: TLVT), Orexigen Therapeutics (Nasdaq: OREX), Lizhan Environmental (Nasdaq: LZEN), Lucas Energy (AMEX: LEI), Syms (Nasdaq: SYMS), HMN Financial (Nasdaq: HMNF), SPAR Group (Nasdaq: SGRP), Lantronix (Nasdaq: LTRX), Hollysys Automation (Nasdaq: HOLI), Authentec (Nasdaq: AUTH), Kips Bay Medical (Nasdaq: KIPS) – Losers – SkyPeople Fruit Juice (Nasdaq: SPU), Natural Alternatives (Nasdaq: NAII), EntreMed (Nasdaq: ENMD), Nautilus (NYSE: NLS), Vringo (Nasdaq: VRNG), Innotrac (Nasdaq: INOC), Golfsmith International (Nasdaq: GOLF), Perfumania (Nasdaq: PERF), Sequans Communication (Nasdaq: SQNS).

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