Wednesday, May 1, 2013

ISM Mfr. & ADP Disappoint; IACI Up in Early Trading ...

The 50.7 manufacturing ISM index for April was below ours and the Street's expectations.  That figure was also lower than March's 51.3. 
  • New orders and production sub-indexes both increased, but we think it might be driven by what has been a pretty tight inventory control over the last couple of months.  We note that the data indicates such inventory management not only on the suppliers' side but also by customers'. 
  • Employment sub-index dipped 4.0 to 50.2, which is not necessarily good news. 
  • Exports sub-index declined after a strong showing in March, while imports increased after being pretty much flat in March. 
  • The 4.5-point decline in prices (to 50.0) may be good news for the bottom-line of producers in the US as it may indicate lower costs.  However, it could also be the 'substitute driver' behind uptick in new orders and production.  We would rather see those sub-indexes increase by stronger demand. 

On the jobs front, ADP reported a very disappointing 119K jobs added in April.  This was significantly below the 155K estimate, and may indicate a disappointing NFP number due out on Friday.  As mentioned in our previous post, we did project NFP lower than the Street's.  Assuming there are no significant revisions, this morning's ADP indicates NFP might be even lower.  Speaking of revisions, ADP did so by lowering its March number to 131K, from 158K!  So, this latest 119K net addition of jobs is even worse than it looks.  Based on this, monthly net change in NFP may come in around 130K - 140K, lower than the 153K consensus.

The update on IACI is a bit more positive.  It shed its AH losses and is currently up more than 1.3% at $47.70.  Again, we will provide more detail on the Company's mixed Q1 results later today.

It looks like the market has begun to hope for some soothing words and thoughts, especially after disappointing economic data, from the FOMC meeting later this afternoon.  After dipping more than 0.60%, the S&P 500 has pared its losses, being down only around 0.34%. 

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