Morning Update

Jobs Data Adds to the Downward Direction

Already under pressure from reports the Obama Administration is aiming for a bankruptcy-led break up of Dow member General Motors and as traders await a key manufacturing report, stocks have moved back to session lows after ADP reported private sector job fell by a larger-than-expected 742,000. Overseas, Europe is under pressure after unemployment rose more than forecast, but Asian markets shrugged off an all-time low in Japanese business confidence. Treasuries pared losses and are moving higher, despite a fourth consecutive increase in mortgage applications, and ahead of the releases of the ISM Manufacturing Index, pending home sales and construction spending. In other equity news, Celgene Corp warned that 2009 profits and revenues will likely come in at the low end of its previous guidance.

As of 8:44 a.m. ET, the June S&P 500 Index Globex futures contract is 10 points below fair value, the Nasdaq 100 Index is 18 points below fair value, and the DJIA is 91 points below fair value. Crude oil is down $1.31 to $48.35 per barrel, and gold is up $8.40 at $931.00 per ounce.

The New York Times reported that the Obama Administration is aiming to ease Dow member General Motors (GM $2) into a "controlled" bankruptcy by persuading some creditors to agree to a plan that would divide the company into two pieces, according to people briefed on the matter. Under the plan, GM would file for prearranged bankruptcy, and would then use a sale authorized under the bankruptcy code to sell off desirable assets to a new company financed by the government. The report said plans are still under discussion and are subject to change and neither the Obama Administration, nor GM, have commented on the report.

Celgene Corp. (CELG $44) is under pressure after the drugmaker said it expects 2009 profits to come in at the low end of its previous guidance, which called for a range of $2.05-2.15 per share. CELG also said it expects revenue to come in at the lower end of the $2.6-2.7 billion range it had previously forecasted.

Private sector jobs tumble, mortgage apps rise for fourth consecutive week

Kicking off a busy day for the economic docket, ADP reported that private sector jobs fell 742,000 in March, more than the Bloomberg estimate of a loss of 663,000 jobs, and February was revised from -697,000 to -706,000. The ADP report is the first read on employment conditions this week, which will culminate with the labor report from the Bureau of Labor Statistics, which is scheduled for release on Friday and expected to show 658,000 jobs were shed from nonfarm payrolls in March. However, ADP has not been a reliable gauge of the labor report, although adjustments have been made recently. Treasuries pared a majority of early losses and have moved higher on the mid-to-long end of the curve following the larger-than-expected drop in private sector payrolls.

In other economic news, the US MBA Mortgage Application Index rose 3.0% to 1194.4 for the week ended March 27, on top of the previous week's 32.2% surge. The Refinance Index advanced 3.7% to 6600.1, and the Purchase Index also rose, gaining a modest 0.1% to 268.0. The Mortgage Bankers Association said the increase in mortgage applications was supported by continued demand for refinancing as 30-year fixed-rate mortgages, excluding fees, fell to 4.61%, a new record low rate since the weekly MBA survey began in 1990.

Mortgage applications have increased for the fourth-straight week, adding to the recent housing data, which has shown some early signs of improvement, contributing to the recent rally in the equity markets. There remains a tremendous amount of fuel that could ignite further rallies, but only nascent catalysts to date. The stock market is one of the key leading economic indicators and along with continued better housing news, we'd become even more confident that this was not just your average bear market rally.

The ISM Manufacturing Index will be released later this morning, and is expected to improve to 36.0 in March from 35.8 in February, according to a survey of economists by Bloomberg. The separation point between contraction and expansion is 50. The index is expected to show an economy that is still in decline (still below 50), but declining at a slower pace. The ISM indices are closely watched, as they are forward-looking barometers and are monitored by the Federal Reserve as a measure of economic growth.

Also, February pending home sales, forecast to come in flat, and construction spending, expected to fall 1.9%, are expected to round out the heavy day on the economic front.

Europe lower as eurozone employment and manufacturing weaken

Stocks in Europe are mostly lower in afternoon action as traders tread cautiously ahead of a slew of economic data in the US, tomorrow's interest rate announcement from the European Central Bank, and as world leaders gather in London for the G-20 meeting. Adding to the lackluster action in Europe, eurozone unemployment increased more than expected, rising from 8.3% in January to 8.5% in February-compared to the Bloomberg consensus of 8.3%, and the eurozone Manufacturing PMI unexpectedly worsened, falling slightly from 34.0 to 33.9, versus the expectation of an unchanged reading. In equity news, Lafarge (LFRGY $11) is under pressure after the world's largest cement maker said it will sell 1.5 billion euros ($2 billion) in new shares to raise capital to pay down debt.

Asia advances despite dismal Japanese data

Stocks in Asia took a cue from the resiliency in the US markets yesterday in the face of several disappointing economic reports, as Japan's Nikkei 225 Index advanced about 3% even after a report showed business confidence dropped to a record low. The Japanese Tankan Manufacturing Index plunged 34 points to -58-the lowest since the survey began in 1974-versus the Bloomberg expectation for the index to fall to -55. However, although the reading was bleak, some relative optimism came from the report as it showed earnings may grow in the second half of the this year, while large companies said they plan to cut spending by a lower-than-expected amount. Also helping Japanese stocks lead the Asian advance, the yen tumbled almost 2% versus the dollar yesterday, which increased optimism toward companies that rely heavily on sales in the US. South Korea's Kospi Index managed to gain 2.3% despite a report that showed exports in the region fell for a fifth-straight month.

Elsewhere, Chinese manufacturing shrank and China Unicom (CHU $10) fell about 8% after its profits missed analysts' estimates-leading Hong Kong's Hang Seng Index 0.4% lower. In other equity news, shares of Japan's largest chipmaker, Elpida Memory (ELPDF $6) jumped about 15% after agreeing to join a Taiwan state-led reorganization aimed at revamping the DRAM industry by developing new uses for the memory chip.