Overseas stock markets are mostly in the red this morning, but equity futures at home are pointing to a strong open ahead of spending, manufacturing, and construction data.

Dow futures are up 37 points to 10,997 and S&P 500 futures are up 5.50 points to 1,189.00.

Meantime, WTI crude oil is trading 26 cents higher at $86.41 per barrel and Spot Gold is up $3.15 to $1,182.35. The 2 year Treasury note is -0-01 at 100-01 yielding 0.98% and the 10 year Treasury note is -0-09 at 99-13 yielding 3.695%.

Sentiment elsewhere is in reverse, however, despite a Eurozone agreement for Greece.

“Global markets are lacking the will to rally this morning ― although the U.K., Japan and China are closed ― and the euro failed to stabilize, tumbling below $1.322, despite hard work over the weekend that saw Greece secure funding from the EU/IMF aid package.”

In the agreement, Euro zone leaders agreed to a €110 billion rescue package. Some €80 billion in loans will come from the euro zone, while the IMF will front €30 billion. Also, €10 billion of the total will be used to create a Greek bank-stability fund.

Furthermore, Greece unveiled new austerity measures to cut the budget deficit by €30 billion, or 13% of GDP, over three years.

Back at home, FDIC Chairwoman Sheila Bair is urging lawmakers to scrap the Senate’s plan to force banks to spin off their derivatives businesses, according to the Wall Street Journal. She said it could destabilize banks and drive risk into unregulated parts of the financial sector. 

Key Events This Week:


8:30 ― The Personal Income & Outlays report should be pretty ideal: broad gains are expected in income and spending, while inflation remains flat. The March report is set to see a 0.4% pick up in income following a flat February, while spending should jump 0.6%, doubling the 0.3% uptick in February. Prices should be flat for the second straight month.

“March’s increase in employment is expected to boost the wages and salaries component of personal income,” said economists at BBVA. “Furthermore, growth in both retail and auto sales point to an acceleration in personal consumption in March, which would mark the fifth consecutive monthly rise. The 1Q10 GDP data reported that the consumer is once again in the drivers’ seat for economic growth, but challenges such as high unemployment, slow wage growth, low household wealth and tight credit could limit the pace of recovery.”

Economist from IHS Global Insight added that the 3.6% gain in first-quarter domestic spending the biggest increase in three years.  

“Since real disposable income was flat, the rise in spending was entirely driven by a lower saving rate (the saving rate fell to 3.1%, from 3.9% in the fourth quarter),” they wrote. “This underlines that rising employment is crucial to provide income support for spending over the rest of the year ― although it seems that employment is indeed now beginning to turn.”

10:00 ― The ISM Manufacturing Index, one of the most closely watched data releases, is set to hit 61.0 in April, improving 1.4 points from the prior month’s score, which itself was up 3.1 points. With any score above 50 indicating growth, this survey is projecting broad-based growth across the manufacturing sector, though economists often point out that it is biased towards larger businesses.

“Manufacturing is the largest component of industrial production, so growth in this sector would indicate that industrial production will also expand early in 2Q10,” said economists from BBVA, noting this will be the ninth straight month of growth for the index. 

Ian Shepherdson from High Frequency Economics said predicting this month’s survey is  tougher than usual. 

“The regional indexes ― the Philly Fed, the Chicago PMI and the Milwaukee PMI ― point to a further modest increase after the March rise to 59.6, taking it to perhaps 62 or so,” he said. “But our take on the internal dynamics of the survey suggest the opposite.”

10:00 ― Construction Spending should put a damper on an otherwise positive day for fresh data. The index should drop 0.3% in March, economists say, following a 1.3% setback in February. Both public and nonresidential components are anticipated to fall, the latter on a more dramatic scale than the former. 

“The construction industry remains mired in a deep recession but the upturn in housing starts suggests residential construction spending may show some modest improvement,” said economists at Nomura. “However, another decline in non-residential spending ― on top of the 10 straight falls that preceded March ― is likely to swamp any gain in residential building.”

Treasury Auctions:

  • 11:30 ― 3-Month Bills
  • 11:30 ― 6-Month Bills


10:00 ― The Pending Home Sales Index was weaker than anticipated in January, falling 7.6%; but over the last 12 months the index has climbed 8.8%. The most recent data saw declines in each major region, but on the upside there should be a technical rebound this month, and improved weather should help as well.

“Some of the improvement could be attributed to the scheduled expiration of the home buyers’ tax credit on April 30th, but low prices and favorable mortgage rates are also expected to attract buyers to the market,” said economists at BBVA. 

Treasury Auctions:

  • 4-Week Bills
  • 52-Week Bills


8:15 ― Two days before the official employment results, the ADP Employment Survey should give some idea of how the private sector shaped during April. The survey showed a decline of 23k jobs in March and 24k jobs in February, but this month should indicate 20k new jobs. 

9:00 ― Treasury announces the terms of next week's round of debt auctions. 3 year notes, 10 year notes, and 30 year bonds will be sold.

10:00 ― Further improvement is anticipated in the ISM Non-Manufacturing Index. In March it moved up 2.4 points to 55.4; this month it should move up to 56.4, as new orders in the prior month leapt to 62.3, the highest level in more than five years.

“Activity is expected to remain at good levels, as freight volumes continued to move up in recent weeks,” said economists at IHS Global Insight. “Financial markets also had a buoyant month, despite the periodic market fits over European sovereign risk. The main drag on a stronger gain will be only glacial improvements in the employment gauge, which is expected to land near the 50 mark.”

7:00pm ― Eric Rosengren, president of the Boston Federal Reserve, speaks to the Money Marketeers of New York University.


8:30 ― Initial Jobless Claims are set to remain steady below the 450k mark in the final week of April, a pace that economists say indicates that there is national growth in the labor markets. Last week, the index fell 11k to 448k, marking the fourth time since September 2008 that weekly claims have been below 450k. Economists anticipate a 3k drop to 445k in this survey.

“We believe that businesses will continue cutting fewer jobs so that initial claims will continue on a gradual downtrend,” said economists from Nomura. “As further evidence that the job market may be improving, the total number of persons receiving jobless pay ― through either the regular 26-week program or the two extended benefit programs ― has been declining in recent weeks.”

8:30 ― The quarterly Productivity & Costs report should indicate the productivity continues to advance, but not at the same pace seen in the final quarter of last year. Economists look for a gain of 2.6% from January to March, versus the 6.9% gain in the prior quarter. Part of the reduction, however, means that employers are hiring people, thus causing productivity per workers to falter a bit. Meanwhile, unit labor costs should be cut 1.0% versus a 5.9% slashing in the prior quarter.

“Most of the cost-cutting, which is behind the recent productivity surge, has already taken place,” said analysts at IHS Global Insight. “Companies will be adding jobs going forward to meet growing demand. As a result, productivity growth should slow markedly this year. “

Economists at BBVA added that productivity has advanced for the past three quarters, as employers have been meeting increases in demand with current workers. “This trend is expected to continue in 1Q10, but at a slower pace because average non-farm payrolls rose in the first quarter. If employers continue to depend on labor productivity to meet demand, the employment situation will recover at a slow pace.”

9:30 ― Ben Bernanke, chairman of the Federal Reserve, speaks to the Chicago Fed‘s 46th Annual Conference on Bank Structure.


8:30 ― The month’s most closely watched data report the, the Employment Report, should bring good news to financial markets. The consensus among economists is that 200,000 jobs were added to the economy in April, which should send the unemployment rate down a tick to 9.6%. The range of expectations is incredibly wide though, with some economists projecting half a million new jobs, while the pessimists look for 110k jobs, meaning that even bad news is relatively good.

“Upward revisions to back data resulted in March being the third consecutive month for gains in private payroll jobs,” said Ellen Zentner from BTMU. “All eyes will be on April’s report, however, to see if that trend continued and strengthened. We think it has. Although March private payrolls included some weather-related bounce from February we think the pace of hiring in the private sector should be comparable in April.”

Economists from BBVA added that Census jobs will once again help boost payrolls, while private sector employment is also rising. 

“An improvement in the employment situation would bode well for consumer spending and could indicate that consumption could pick-up further in the second quarter,” they wrote. “Nevertheless, even though the economy is adding jobs, the unemployment rate will remain high as those who dropped out of labor market begin to look for work again.”

Taking a wider view, analysts at IHS Global Insight said the economy will add “about a million jobs this year―a modest but not jobless recovery.” They said bringing the unemployment rate down will be a long slog though, as potential workers seeing job creation will come back into the labor force and thus slow the unemployment decline.

11:30 ― Charles Plosser, president of the Philly Fed, addresses the Delaware State Chamber of Commerce Economic Outlook luncheon in Wilmington.

3:00 ― Consumer Credit is set to be cut by $3.0 billion in March, or just a fraction of the massive $11.5 billion contraction seen in February. The smaller cut may indicate some stabilization, especially in light of the January’s $10.6 billion credit upswing.

“The pace of decline in consumer credit outstanding could slow, although still-high household leverage implies that considerable debt reduction still lies ahead,” said economists at Nomura.