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Early in the week, disappointing earnings, news from China and Europe, and some unexpected weakness in U.S. indicators pulled equities down and increased chatter that the recovery is stalling. But on Friday, an unexpectedly strong employment report had the bears rethinking their position on the status of the economy. Nonetheless, equities only benefitted moderately from the good news.
 Trading started the week on a positive note on news from Sunday that terrorist Bin Laden had been killed. But stocks turned down early in Monday trading when the ISM manufacturing report fell short of expectations. Markets then gave more attention to a release showing a Chinese manufacturing index cooling in response to tighter monetary policy and a higher yuan. Commodity producers were hard hit.
Even though U.S. factory orders posted a little better than expected, equities declined Tuesday on disappointing corporate earnings. Pfizer was the biggest weight on blue chips after disappointing on its outlook. The energy patch also pulled down the broader market with a $3 per barrel drop in the price of spot crude. However, GM did rise notably after reporting a sharp gain in April auto sales.
Economic data seriously thumped stocks at mid-week as ADP employment was weaker than forecast and ISM non-manufacturing slowed significantly in April. Also, investors were reminded of European sovereign debt problems after Portugal agreed to a $116 billion bailout.
The biggest hit to equities for the week was Thursday after initial jobless claims jumped to 474,000. Also, Jean-Claude Trichet, president of the European Central Bank, did not give a signal to confirm an impending rate increase, leading to a sharp increase in the dollar. In turn, oil and other commodities plunged, taking equities down, too. Finally, many traders simply decided they preferred to sit on the sidelines ahead of the Friday employment report, moving funds into cash.
Shares initially rose sharply after Friday’s much stronger-than-expected increase in payroll jobs. But by close, stock advances were moderate for the day as traders became jittery on rumors that Greece will be leaving the Eurozone, leading to a significant drop in the euro. Greek authorities denied the rumors.
Overall, the employment report stopped the plunge in stocks, but there was not much bounce.
Equities were down this past week. The Dow was down 1.3 percent; the S&P 500, down 1.7 percent; the Nasdaq, down 1.6 percent; and the Russell 2000, down 3.7 percent.
For the year-to-date, major indexes are up as follows: the Dow, up 9.2 percent; the S&P 500, up 6.6 percent; the Nasdaq, up 6.6 percent; and the Russell 2000, up 6.3 percent.
Weekly percent change column reflects percent changes for all components except interest rates. Interest rate changes are reflected in simple differences.
 Treasury yields took a big hit this past week on mostly softer-than-expected economic data, a drop in oil and other commodities prices, and on a strengthening in the dollar.
The two biggest declines were on Wednesday and Thursday. At mid-week, the ADP and ISM non-manufacturing reports pushed down on rates while the surge in jobless claims weighed on yields on Thursday. The sharp decline in equities on Thursday led to a sharp move to flight-to-safety.
 For this past week Treasury rates were down as follows: 3-month T-bill, down 3 basis points; the 2-year note, down 5 basis points; the 5-year note, down 12 basis points; the 7-year note, down 15 basis points; the 10-year note, down 14 basis points; and the 30-year bond, down 10 basis points.
Flight to safety clearly was back with equities dropping sharply and funds moving into Treasuries. The 3-month T-bill dropped to 0.01 percent compared to 0.04 percent the prior week.
 Crude oil prices plunged this past week on many of the same factors that bumped down Treasury yields. The week started flat despite news of Bin Laden’s death. Crude dropped a sharp $3 per barrel Tuesday, following equities down and on trader expectations of a build in inventories to be reported the next day.
Indeed, a government report at mid-week put U.S. supplies of crude at a six-month high and the spot price of West Texas Intermediate declined more than a buck and a quarter for the day. Disappointing economic news—ADP and ISM non-manufacturing—also weighed on WTI.
However, the big plunge in crude was Thursday as again crude dropped in tandem with equities. Spot WTI plunged $9.40 per barrel, falling below the $100 mark. The very disappointing initial jobless claims report pushed both equities and oil down. Throughout the week, a rising dollar tugged down on crude but played a key role Thursday after the ECB president delayed boosting rates. Another rise in the dollar led to another dip in crude the last day of the week.
Oil posted its biggest weekly decline since 2008. Net for the week, spot prices for West Texas Intermediate sank $14.97 per barrel to settle at $98.41.
Economic news was mixed this past week but the highlight was a relatively healthy employment report for April. And though indicators mainly disappointed—they still were largely positive.
 Just when talk about a slowing economy is gaining credence, the jobs report surprises on the high side. But there are still soft spots. Nonfarm payroll employment in April expanded a healthy 244,000, following a revised 221,000 advance in March and a 235,000 rise in February. Also, the February and March revisions were up net 46,000. Private nonfarm payrolls were even stronger, growing 268,000 in April, following a 231,000 rise in March. Private jobs have been on an uptrend starting in March 2010, gaining a cumulative 2.090 million.
 Improvement in April was seen in goods-producing and service-providing sectors. Goods-producing jobs posted a 44,000 boost, following a 37,000 rise in March. For the latest month, manufacturing jobs increased 29,000 after a 22,000 gain in March. Even construction expanded though with a modest 5,000, following a 2,000 uptick the prior month. Mining jumped 11,000 in April.
Private service-providing jobs increased 244,000 after a 194,000 rise in March. Trade & transportation was up 71,000 in April with 57,000 coming from retail trade, including restaurants. Other notable gains included professional & business services, up 51,000; health care, up 37,000; and leisure & hospitality, up 46,000.
 Government jobs fell 24,000, following a 10,000 dip in February. The latest was led down by a 14,000 drop in local government—mostly non-education.
Wages were sluggish in April as average hourly earnings rose 0.1 percent, following a 0.2 percent gain in March. The average workweek for all workers posted at 34.3 hours, the same as in March.
One of the curiosities of the latest employment situation report was the household survey, as the unemployment rate rose to 9.0 percent from 8.8 percent in March. Basically, household employment in recent months had been running ahead of establishment jobs. Household may have been lifted by self-employed—not included in payrolls. And the unemployment rate had been helped by a drop in the labor force earlier in the year—possibly reflecting more discouraged workers dropping out of the labor force.
Looking ahead, the April employment report is pointing toward favorable numbers for the manufacturing component in industrial production and the wages & salaries component in personal income. Private aggregate earnings rose 0.4 percent while production worker hours in manufacturing also gained 0.4 percent.
On a final note, one side show related to the strong payroll number is the debate by some on whether McDonald's new “national hiring day” had a significant impact on the April jobs number' According to McDonald's, the company (including franchisees) hired 62,000 people in the United States after receiving more than 1 million applications. While some might argue that private jobs would have risen 62,000 less without the April 19 national hiring day, technical issues suggest the impact of this special hiring day was modest on April’s employment situation report. Payroll jobs are counted in the payroll period that includes the 12th of the month which was a week earlier than the hiring day. Those actually hired most likely were keyed into payroll systems in time for the May 12 payroll period but not the April 12 payroll period.
 Auto sales have not returned to pre-recession levels, but they continue to recover from recession lows. And they reflect a mild vote of confidence by the consumer in the recovery.
Motor vehicle sales were essentially steady in April at a 13.2 million unit annualized pace for domestic and import brands, compared to 13.1 million in March. Domestics rose to 10.1 million in April from 9.9 million the prior month. Imports slipped to 3.1 million from 3.2 million annualized.
Domestic manufacturers should be happy as the recent trend toward domestic makes continued. The import label share slipped to 23.3 percent of total sales from 24.7 percent in March and down from a high of 30.5 percent in February 2009. Apparently, U.S. manufacturers have finally responded to consumer demand in a credible manner by producing higher quality, more fuel efficient, and more desirable models.
One curiosity in the latest numbers is that strength was in sales of domestic light trucks. This likely reflects a downsizing in many SUVs which are included in the light truck category. Looking ahead, the latest unit new motor vehicles sales point to a soft auto component in the retail sales report although price effects could still tilt that component up or down for the month.
 Manufacturing growth appears to be moderating somewhat at the start of the second quarter. Nonetheless, the composite index remained relatively strong with a reading of 60.4 but reflected an easing from 61.2 in March. The composite index has been above the 60 mark for four consecutive months, indicating activity well above the breakeven mark of 50. While the index is below the recovery high of 68.0 set in February, the April figure is well above the recession low of 33.3 set in December 2008.
Still, there appears to be some easing in growth as four of the five composite components declined in April. Indexes for new orders, production, employment, and supplier deliveries were less robust in the latest month. But each of these still remained above 60—indicating solid though growth. The employment index remains particularly encouraging—manufacturers would not be hiring unless optimistic about future production.
The one component in the composite that showed absolute improvement was inventories which moved from 47.4 in negative territory to 53.6 just over breakeven. Even with the broad but moderate deceleration for the month, forward momentum is still good. Even though inventories provided positive support for the composite, its level is still soft, meaning inventory rebuild is likely still on. Although not a part of the composite, backlog orders jumped, adding to the argument the momentum is still healthy. Overall, the manufacturing sector kept up its pace during the first quarter and the first look at the second quarter points to more solid growth.
 While ISM manufacturing remained robust despite moderation in April, the same cannot be said for ISM non-manufacturing. The composite dropped notably, coming in at 52.8 in April versus 57.3 the prior month. By components, new orders were down sharply and while business activity and employment also tugged down on the headline reading. Supplier deliveries actually had a modest lift while inventories had an unchanged contribution.
The most notable deceleration was for the new orders index which slowed to 52.7 from 64.1 in April. Despite the lower number, new orders remained in positive territory (above breakeven of 50) as did the overall composite and the remaining components—meaning economic activity is still on an uptrend but a softer one.
 The construction sector saw a moderate rebound in March, following a likely weather-related drop in February. Construction spending in March rebounded 1.4 percent after dropping a revised 2.4 percent in February.
The latest rise was led by a 2.6 percent boost in private residential outlays, following a 6.8 percent plunge the prior month. Private nonresidential construction spending gained 1.8 percent, following a 1.0 percent rise in February. Public outlays edged up 0.1 percent after a 1.4 percent decrease the previous month.
With all three major categories showing some improvement in March, the underlying story is likely that construction workers were actually able to show up for work in March more so than in the atypically winter storm stricken February. This sector is still anemic but at least construction spending is edging up instead of in the other direction.
The recovery has been uneven in recent weeks. But the latest employment and manufacturing reports suggest that the economy is regaining some momentum in the second quarter.
Look for news on inflation and the health of the consumer. Three views of inflation begin with import/export prices on Tuesday and producer and consumer prices on Thursday and Friday respectively. Retail sales Thursday and consumer sentiment Friday will provide an update on consumer wellbeing.
Import prices jumped 2.7 percent in March but were heavily skewed by a 10.5 percent surge in prices of petroleum imports. Excluding petroleum, import prices rose 0.3 percent, a step down from the prior four months which saw a 0.9 percent peak in January. The year-on-year rate for total import prices posted at a strong 9.7 percent rate in March. Higher oil prices are likely to boost the headline number for import prices in April.
The U.S. international trade gap narrowed moderately in February, to $45.8 billion from January's $47.0 billion. The February shrinkage reflected a 1.7 percent drop in imports and a 1.4 percent dip in exports. However, both imports and imports came off very strong increases in January of 5.4 percent and 2.6 percent, respectively. Most of the improvement in the overall deficit was in the petroleum goods gap. There is a strong likelihood that a jump in oil prices will worsen the petroleum goods gap and overall deficit.
International trade balance Consensus Forecast for March11: -$47.7 billion
Range: -$48.9 billion to -$44.3 billion
The U.S. Treasury monthly budget report in March came in about as expected at $188.2 billion. Half way through the fiscal year, the government's deficit is $829.4 billion for a year-on-year deepening of more than 15 percent. Outlays are running nearly 11 percent higher this fiscal year and, in a special item for March, include $5.9 billion for housing and economic recovery programs. Growth in receipts is only seven percent but individual taxes, up 21 percent, are a special strength. Looking ahead, the month of April typically shows a sizeable surplus for the month. Over the past 10 years, the average surplus for the month of April has been $73.6 billion and $70.4 billion over the past 5 years. These numbers have been pulled down by atypical April deficits the last two years. The April 2010 figure was a deficit of $82.7 billion.
Treasury Statement Consensus Forecast for April11: -$65.0 billion
Range: -$75.0 billion to -$16.5 billion.
The producer price index in March eased but came in at a still hot 0.7 percent after surging 1.6 percent in February. Energy led the latest gain while food edged back from a huge surge in February. At the core level, the PPI firmed to a 0.3 percent rise, following a 0.2 percent advance in February.
PPI Consensus Forecast for April11: +0.6 percent
Range: +0.3 to +1.0 percent
PPI ex food & energy Consensus Forecast for April11: +0.2 percent
Range: +0.1 to +0.3 percent
Retail sales in March advanced 0.4 percent, following a revised 1.1 percent gain in February and a revised 0.8 percent increase in January. Excluding autos, sales gained 0.8 percent, following a 1.1 percent increase in February. Importantly, sales excluding autos and gasoline in March advanced 0.6 percent, following a 0.9 percent increase in February. Some of components that were strong include furniture & home furnishings, building materials, electronics & appliance stores, clothing, general merchandise, and food services & drinking places.
Retail sales Consensus Forecast for April11: +0.6 percent
Range: +0.2 to +1.2 percent
Retail sales excluding motor vehicles Consensus Forecast for April11:+0.6 percent
Range:+0.2 to +1.5 percent
Initial jobless claims for the April 30 week surged 43,000 to 474,000. But the government cited special factors behind the jump. The biggest factor was a timing adjustment for a spring break in New York State followed by a new emergency benefit plan in Oregon. The third factor was the auto sector where claims related to retooling increased. The four-week average for initial claims jumped 22,250 to 431,250 which showed a nearly 40,000 increase from a month ago.
Jobless Claims Consensus Forecast for 5/7/11:430,000
Range:415,000 to 465,000
Business inventories growth slowed in February, to 0.5 percent from January's 1.0 percent. Sales, however, were a little soft, rising only 0.2 percent in the latest month on a 0.8 percent drop in the merchant wholesalers component. More recently, factory inventories jumped 1.1 percent in March, indicating that overall business inventories may see a sizeable boost for the month.
Business inventories Consensus Forecast for March11: +0.8 percent
Range: +0.1 to +0.9 percent
The consumer price index in March posted a 0.5 percent hike, matching the increase in February. Excluding food and energy, however, the CPI eased to 0.1 percent, following a 0.2 percent rise and coming in below analysts’ forecast for 0.2 percent. By major components, energy jumped 3.5 percent after surging 3.4 percent in February. Food price inflation worsened to a 0.8 percent gain, following a 0.6 percent boost in February.
CPI Consensus Forecast for April11: +0.4 percent
Range: +0.3 to +0.6 percent
CPI ex food & energy Consensus Forecast for April11: +0.1 percent
Range: +0.1 to +0.3 percent
The Reuter's/University of Michigan's Consumer sentiment index for April rose to 69.8 versus 69.6 at mid-month and 67.5 in March. Back in February, before the Libyan civil war and the Japanese earthquake, consumer sentiment was at a recovery high of 77.5. Components of the composite index were mixed as expectations gained 0.4 point from mid-month to 61.6 and current conditions dipped 0.2 point to 82.5.
Consumer sentiment Consensus Forecast for preliminary May11:70.0
Range:69.5 to 73.0
R. Mark Rogers is the author of The Complete Idiot’s Guide to Economic Indicators, Penguin Books, 2009.
Econoday Senior Writer Mark Pender contributed to this article.
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