We got more bad economic news this morning as the ADP employment report along with April factory orders were disappointing, while non-manufacturing ISM barely beat the consensus.
ADP private payroll number for May was 135K, significantly below the 171K consensus. The April figure was also revised down by 6K. This is not good news regarding Friday's BLS employment report. It appears that the Street's NFP change expectation of 167K might be a bit too optimistic. Then again, our 95K projection is certainly out of the Street's 147K - 210K range of estimates.
April factory orders improved 1% sequentially, but such improvement was still below the 1.4% expectation. In addition, the March figure was revised from -4% to -4.7%. Monday's manufacturing ISM report certainly goes along with the factory orders.
ISM non-manufacturing index of 53.7 was slightly higher than the 53.5 consensus. New orders and business activity sub-indexes improved, while employment, exports, imports, and inventories did not. Slowdown in inventory growth, combined with a too-high of an inventory sentiment (62.5) certainly indicates the uncertainty out there among many different types of businesses. We think the dip in inventories may also explain increase in new orders, as backlog of orders remained flat.
At least for the time being, bad economic news is impacting the equity market negatively. We will see if the Beige Book, to be released later today, will provide any psychological healing. S&P 500 is down 0.90%, while VIX is up nearly 7%. AVID is getting worked, down 1% at $6.50. BCOR is down 0.8% at $17.80, while FB continues to take a dump, down 1.4% at $23.19. We note FB is now below the $23.50 valuation we gave it a long time ago. We'll see if management can come up with some new gadgets and gimmicks to keep the stock above $20. Lastly, IACI is up 0.5% at $48.50.
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