Pisani: Financials — The Bad News

Futures dropped about 4 points as the ADP Employment report showed a decline of 23,000 jobs, well below expectations of a gain of 40,000 jobs. Treasury yields declined, and the dollar weakened.

Bulls are already noting that the ADP report "does not incorporate a weather related rebound that could be present in this month's BLS data," so there is no reason to abandon the projections for healthy gains when the March jobs report comes out Friday.

The ADP report only includes private jobs, so it would exclude hirings due to the Census, for example. (See:Private Payrolls Show Surprise Decline as Recovery Lags)

I have been noting for a week that the Street seems to be unusually bullish on the March jobs report. While consensus calls for a gain of 200,000 jobs, many are above that number. Stocks have run up in anticipation of a strong number, and many traders feel that even a gain of 200,000 may not be enough to move the market up.

Elsewhere:

1) Quarter end is approaching! What I like: S&P 500 up 5.2 percent, a respectable move up, the fourth straight quarter of gains.

What I don't like: somebody's taking profits in financials! KBW Bank Index (BKX) down 3 days in a row, and the small-and-midcap Nasdaq Bank Index (BANK) has been down 5 days in a row.

Some kind of leadership rotation is not uncommon as we enter a new quarter. But bank stocks have a huge burden this year: much of the profit gains in the S&P 500 this year depend on big gains in bank profits. Two things need to happen: 1) loan losses need to stabilize (we are seeing that), and 2) loan growth needs to materialize (not seeing that).

2) Honeywell raised guidance, and importantly went out of their way to note that the profit gains were on "stronger orders and sales" in addition to cost controls. HON again raised guidance for the quarter to $0.45-$.49 from $0.40-$0.45, and expects full-year earnings to be near the high-end of its target of $2.20 to $2.40 a share.

3) IPO markets continues with strong pricing. Meru Networks (MERU), which makes equipment for local area networks, priced 4.4 m shares at $15, the high end of the price talk of $13-$15. Primerica should price tonight.

4) Rite Aid down 8 percent after reporting a wider-than-expected Q4 loss (loss of $0.24 vs. loss of $0.19 consensus), hurt by a milder flu season and poor pharmacy margins.

Same-store sales fell 2.4 percent in the past quarter and have continued to decline slightly (down 0.1 percent) in March - the first month of the current quarter. Hurting top line growth this month were poor pharmacy comps (down 1.0 percent), compared to a 1.8 percent rise in general merchandise comps.

Additionally, the drug store chain's outlook is weak. It forecasts a bigger-than-expected loss for the current on lower-than-expected sales.

5) Oil drillers may get a boost this morning on a New York Times report that President Obama may propose opening up areas along parts of the East Coast, the north coast of Alaska, and the eastern part of the Gulf of Mexico for oil and natural gas drilling. These areas have been off-limits to oil exploration in the past.

It's not known how much gas and oil lies in all these areas, but 3.5 billion barrels of oil and 17 trillion cubic feet of gas may rest in the eastern part of the Gulf of Mexico alone.

While oil companies would applaud this proposal, the plan would surely stimulate strong resistance amongst environmentalists.

Where Big Financials Stand Now:

Citigroup

Bank of America

JPMorgan Chase

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