The Market Today

Apple Announces Largest Share Buyback in History; ADP Shows Job Gains Remain Strong

by Craig Dismuke, Dudley Carter


ADP Payroll Report Portends Another Strong BLS Report Friday:  The ADP private payroll report for April projected 204k more jobs added, beating expectations of 198k and 13k above the rolling 12-month average.  March’s payroll number was revised down from 241k to 228k.  This now marks the sixth consecutive month with ADP reporting over 200k private payrolls added, the second-longest streak since ADP began projecting payroll growth back in 2002.  Both goods-producing and services-providing industries showed strength.  Goods producing jobs rose 36k in April, including strong months for manufacturing (+16k) and construction (+16k).  On the services side, the professional and business services (+46k) and leisure and hospitality (+26k) sectors were the biggest outperformers.  Small- and medium-sized businesses (0-49 employees and 50-499 employees respectively) are gaining steam with both of their hiring rates ramping up after slowdowns for both in 3Q17.  The 6-month average for small business hires is back up to 66k from a low point of 29k while medium-sized businesses are averaging a hire rate of 99k per month over the past six months, up from 63k back in November.


Fed Policy Statement – Focus on Inflation Wording, Policy Announcement Tomorrow:  The Fed concludes its two-day meeting today with a policy announcement scheduled for 1:00 p.m. CT.  They are expected to firm up their assessment on inflation.  The March Statement stated that headline and core inflation “have continued to run below 2 percent”.  However, headline PCE hit 2% for only the second time since 2012 in yesterday’s March report and core PCE rose to 1.9% for the first time since mid-2016.  Additionally, they appear unlikely to list any areas of concern such as tightening financial conditions or trade concerns given their broadly dismissive attitude seen in the March meeting Minutes.  As such, the results are likely to create less volatility than previous statements… unless the wording is strong enough to indicate a possible shift to four total hikes in 2018 rather than the currently expected three hikes.  There is no post-meeting presser.



Yesterday – Tech Helped Stocks Recover as Rates Moved Up in Quiet Session: The S&P 500 came roaring back after lunch to erase a steep early decline and finish near the highs of the day. The index bottomed at down 0.9% just after lunch but made a sharp reversal to finish up 0.3% on its final tick. The tech sector’s 1.5% improvement was primarily responsible for the S&P’s daily gains. Apple finished in the top ten of all tech companies before it reported (after the close) revenue and profits that topped estimates for its fiscal second quarter, an increase in its quarterly dividend and level of share repurchases, and better-than-expected forward guidance. The Dollar continued to strengthen and held its overnight gains that pushed it through its 200-day moving average. Rates helped as the Treasury curve moved back up. The 2-year yield closed at a new cycle-high of 2.51%, the 5-year yield finished up 1.5 bps, and the 10-year yield added 1.1 bps to 2.96%.


Overnight – Treasury Yields Inched Higher Ahead of ADP, Fed Decision: Ahead of this morning’s ADP report and this afternoon’s Fed decision, tech was leading a modest firming in U.S. equity futures, the Treasury curve was steepening on higher yields, and the Dollar had edged lower. Global equities were mixed with the major indexes trading together for the first time this week due to earlier holiday closures. Asian markets were generally weaker but European bourses jumped at the open. The Stoxx Europe 600 was up 0.6% and at a three-month high. Technology was near the top but materials companies were leading the way. The Euro, which is trading at its weakest level since mid-January, has been supportive of stocks and another positive PMI from China likely aided the materials sector. Sovereign yield curves were mostly steeper on higher yields with the 2-year Treasury up 0.8 bps to 2.51% and the 10-year yield 2.3 bps higher at 2.99%.



Revisions to Prior Months’ Construction Spending Data Make Up for March Disappointment: Construction spending dropped 1.7% in March, disappointing relative to the 0.5% gain expected by the median economist. However, the prior two months were revised up significantly with 0.9% added to February’s initial 0.1% estimate and January’s unchanged result taken up to 1.7%. In the details, public spending was flat in March and private construction dropped 2.1%. Both single family and multi-family activity slowed in the private sector, but a big drop in home improvement spending stood out. Home improvement spending cooled 8.0%, the most of the cycle, but likely reflected payback after a couple of strong months of activity.


April ISM Disappointed as Key Metrics Slowed: April’s ISM Manufacturing PMI posted a larger-than-expected decline on Tuesday to its lowest level since July. Driving the drop were weaker readings on new orders, production, employment, and inventories. The weakness across those categories was more than enough to negate a slightly firmer supplier deliveries index. The supplier deliveries index is considered a gauge of delays in the supply pipeline, rising as supplier deliveries slow due to bustling economic activity. In other notable shifts, the prices paid index rose for a fourth month to its highest level in seven years. Despite the weaker index readings, the anecdotal quotes included in the report were a bit more sanguine, including phrases such as “we are seeing strong sales”, “business is off the charts”, “demand is up for products”, “production orders…are still strong”, “order book is full”, and “backorders remain strong”. That tone was more consistent with the Markit Manufacturing PMI that, just before the ISM report, was reported at its highest level in over three years.


ICYMI – April Monthly Review: U.S. equities improved in April despite several points along the Treasury curve touching the highest levels in years. The 2-year yield reached as high as 2.48% (highest since September 2008), the 5-year yield rose to as high as 2.80% (August 2009), and the 10-year yield crossed 3.00% for the first time since January 2014. All three added more than 20 bps on the month. A mid-month commodities rally became the latest force to bolster expectations inflation would firm. The S&P 500 and Dow both gained 0.3%, with the latter now having improved in every April since 2005. Corporate earnings started strongly. According to FactSet, 79% of the 53% of companies that reported through April 27 beat estimates, on pace for the best quarter since they began tracking in 2008. As rates rose, the Dollar firmed 2.1% in its best month since the 2016 election. Growth slowed in the first quarter to 2.3% as consumer spending grew at its weakest pace since 2013. However, the fast consumer data for March that was released in April supports expectations for a rebound in the coming months. Click here to view the full review.

The information included herein has been obtained from sources deemed reliable, but it is not in any way guaranteed, and it, together with any opinions expressed, is subject to change at any time. Any and all details offered in this publication are preliminary and are therefore subject to change at any time. This has been prepared for general information purposes only and does not consider the specific investment objectives, financial situation and particular needs of any individual or institution. This information is, by its very nature, incomplete and specifically lacks information critical to making final investment decisions. Investors should seek financial advice as to the appropriateness of investing in any securities or investment strategies mentioned or recommended. The accuracy of the financial projections is dependent on the occurrence of future events which cannot be assured; therefore, the actual results achieved during the projection period may vary from the projections. The firm may have positions, long or short, in any or all securities mentioned. Member FINRA/SIPC.
Copyright © 2022
This is a publication of Vining-Sparks IBG, LLC
775 Ridge Lake Blvd., Memphis, TN 38120