Morning Market Update

Positive Action in Labor Data’s First Reaction

The bulls are enjoying a morning trot as traders react to Friday’s labor report from the Department of Labor, which showed 162,000 jobs were added to nonfarm payrolls and the unemployment rate remained at 9.7% for the third-consecutive month. Treasuries are mixed in morning action after declining Friday on the employment report, ahead of some economic releases after today’s opening bell, which will include a key service sector activity gauge and a look at pending home sales. In equity news, Apple Inc. announced that it sold over 300,000 iPads in its debut weekend, and SandRidge Energy Inc reported that it is acquiring rival Arena Resources Inc for about $1.6 billion. Overseas, markets are mostly higher but action is substantially light as a majority of markets remain closed for holidays.

As of 8:50 a.m. ET, the June S&P 500 Index Globex future is 4 points above fair value, the Nasdaq 100 Index is 3 points above fair value, and the DJIA is 24 points above fair value. Crude oil is up $0.86 at $85.73 per barrel, and the Bloomberg gold spot price is up $5.30 at $1,125.10 per ounce. Elsewhere, the Dollar Index—a comparison of the US dollar to six major world currencies—is down 0.1% at 81.18.

Apple Inc. (AAPL $236) announced that it sold over 300,000 iPads in the US as of midnight on April 3rd, including deliveries of pre-ordered devices, deliveries to channel partners, and sales at AAPL retail stores.

In M&A news, SandRidge Energy Inc. (SD $8) announced that it is acquiring rival Arena Resources Inc. (ARD $34) for about $1.6 billion. The two oil and natural gas firms announced that they have entered into a definitive merger agreement under which ARD shareholders will receive stock and cash consideration valued at $40 per ARD share they own, representing a 17% premium based on the April 1st closing price. SD will be the surviving company and the deal will create a combined enterprise value of approximately $6.2 billion.

Equity markets have chance to react to labor report and service sector reading

While the equity markets were closed in observance of Good Friday last week, the US Department of Labor released its labor report, showing nonfarm payroll employment increased by 162,000 in March, compared to the forecast of economists surveyed by Bloomberg, which called for an increase of 184,000. Also, the report revealed that the unemployment rate remained at 9.7% for the third-straight month, as expected, while average hourly earnings declined 0.1% month-over-month (m/m) in March, compared to the 0.2% increase that economists had forecasted. Moreover, January’s 26,000 decline in nonfarm employment was revised to a gain of 14,000, and February’s loss of 36,000 jobs was revised to a decline of 14,000. The increase in jobs in March was aided by the hiring of 48,000 workers from the federal government for Census 2010.

Other aspects of the report showed the number of long-term unemployed—those jobless for 27 weeks and over—increased by 414,000 over the month to 6.5 million, and the number of persons working part time for economic reasons—individuals working part time because their hours had been cut back or because they were unable to find a full-time job—rose to 9.1 million in March. Treasuries moved lower in Friday after the report and are mixed in early trading today.

Later this morning, the bulk of this week’s economic data will be released, headlined by the ISM Non-Manufacturing Index, expected to increase to 54.0 in March from 53.0 in February, which would mark the third-straight reading above the 50 level that separates contraction versus expansion in the economy. The services sector has not bounced back to the same degree that the manufacturing sector has—as the companion ISM Manufacturing Index posted the eighth-consecutive month of expansion last week—although manufacturing also plunged to a greater degree during the crisis. Manufacturing has rebounded on the back of export strength, while growth in the services sector has been tempered by constraints on US consumer spending, such as deleveraging and high unemployment. Meanwhile, pending home sales, will also be released today and the gauge of the pipeline of existing home sales is forecasted to show a m/m 1.0% drop for February.

The other major report this week will be the Federal Reserve’s release of the minutes from the March Federal Open Market Committee (FOMC) meeting mid-day tomorrow. There were little in the way of surprises at the March meeting, as there were no changes to interest rates, or language and the Fed reiterated the March expiration of the mortgage-backed security (MBS) purchase program. Kansas City Fed President Thomas Hoenig dissented for the second-straight meeting, believing that continuing to “pre-commit” to the “exceptionally low” levels of fed funds for an “extended period” was no longer warranted because it could lead to the buildup of financial imbalances and increase risks to longer-run macroeconomic and financial stability.

Other releases on this week’s US economic calendar include MBA Mortgage Applications, consumer credit, initial jobless claims, and wholesale inventories.

Europe on holiday but some data is reported

The vast majority of markets in Europe remained closed for holidays, but there were some economic reports that are worth mentioning, headlined by a report that showed Spain’s Consumer Confidence Index improved from 71.1 in February to 72.7 in March. Other reports included Russia’s PMI rising from 51.0 in February to 53.6 in March, and separate reports showed Turkey’s producer prices rose more than expected in March while the nation’s consumer prices rose by an amount that matched the expectations of economists. Russia’s MICEX Index is down 0.1% and Turkey’s ISE National 100 Index is up 0.6%.

Asia advances in short handed session

Stocks in Asia were mostly higher on the heels of the US labor report, with Japanese equities leading the way, as the Nikkei 225 Index rose 0.5% and the broader Topix Index increased 0.6%. However, gains were limited by some profit taking as the Nikkei sits a an 18-month high, and amid a sharp decline in shares of Fast Retailing (FRCOY $18) after the nation’s largest clothing retailer announced that domestic same-store sales—sales at stores open at least a year—at its Uniqlo casual clothing chain fell over 16% for March year-over-year (y/y). Elsewhere, South Korea’s Kospi Index ticked 0.1% higher and India’s BSE Sensex 30 Index rose 1.4%, but action was lighter than usual, with markets in China, Hong Kong, Taiwan, and Australia all closed for holidays.