Weak EU Growth...And Oh That ADP!

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U.S. futures were dropping all through the early morning as European manufacturing numbers were weak. Italian and Spanish PMIwere both below 50, showing continuing contraction. Even Germany came in at 46.2, a tad below expectations and firmly in contraction territory.

The euro weakened when that news came out, and never recovered.

Then the April ADP jobs growth figure came out at 116,000, well below expectations of 175,000, and futures drooped another four points. True, ADP has been choppy: Numbers have been 226,000 in November, 267,000 in December, 182,000 in January, 230,000 in February, and 201,000 in March.

But 116,000? Ugh. Lowest since September 2011. Hopes had risen yesterday, since the April ISM indicated notable gains in employment, which might carry through to the nonfarm payroll report on Friday.

The 10-year Treasury yield fell to 1.90 percent, the lowest since February.


1) We are 70 percent through earnings season: With 357 companies in the S&P 500 index reporting, we are seeing earnings growth of 6.9 percent, well above expectations of 0.95 percent when we began earnings season three weeks ago, according to S&P Capital IQ. Just under 70 percent have beat expectations, and that is higher than the historic norm of about 62 percent.

2) The Chinese economic data puzzle. A day after the "official" China PMI came out stronger than expected (53.3, showing expansion), the HSBC version came in at 49.3, which showed contraction for the sixth straight month in a row, though a little better than expected.

Why is that there are two PMIs, one "official" and the other a private one? Why does the official one show expansion, while the private one continues to show contraction? Ask such impertinent questions and you are told the "official" number concentrates on large, state-owned companies, while the private HSBC number focuses on smaller companies. Smaller companies must be more pessimistic. Or maybe larger, state-owned companies are more optimistic.

Or maybe they're told to be more optimistic.

3) Trucker Con-Way, a Dow transport average component, reported better-than-expected earnings. It gets about 60 percent of its revenues from less-than-truckload freight hauling. Tonnage growth was modest, up only about 1.5 percent, but prices were higher and, due partly to the warmer winter, cost controls were better than expected.

4) WellCare Health Plans jumps 7.6 percent pre-market after the health insurer beat earnings estimates — more than doubling first-quarter consensus view — and provided upbeat 2012 guidance. WellCare reported first-quarter earnings per share of $1.32, compared to analysts’ $0.54 view. The Medicaid and Medicare-focused company saw 22 percent premium growth, coupled with a 6 percent rise in membership. The company's release follows disappointing reports from rivals Coventry Health Care, Aetna, and Humana — all of which reported higher medical-care costs, while WellCare noted a dip in costs as its ratio slid to 86.1 percent from 86.9 percent. WellCare raised its 2012 outlook to between $5.20 and $5.40 a share, versus its previous forecast of between $4.40 and $4.60 a share. The Street expects 2012 earnings per share of $4.66.


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