88,000 New Non-Farm Jobs in April, Unemployment Rate Still Historically Low at 4.5%, Hourly Earnings Still Substantiall Exceeding Inflation

- The Unemployment Rate for April rose to 4.5% versus estimates of 4.5% and 4.4% in March.
- The Change in Non-farm Payrolls for April was 88K versus estimates of 100K and 177K in March.
- The Change in Manufacturing Payrolls for April was -19K versus estimates of -14K and -18K in March.
- Average Hourly Earnings for April rose .2% versus estimates of a .3% gain and a .3% rise in March.

BOTTOM LINE: Employers in the US last month added fewer jobs and the unemployment rate rose slightly, Bloomberg reported. The unemployment rate ticked slightly higher, but still remains historically low and is down from 5.1% in September 2005, notwithstanding fewer real estate-related jobs and significant auto production cutbacks. The unemployment rate’s current 12-month average is 4.6%. It has only been lower during two other periods since the mid-50s. The economy has created almost 2 million jobs in just the last year. As well, the Monster Employment Index hit another record high in April. The 50-week moving average of initial jobless claims(318,700) has been lower during only two other periods since the 70s. Furthermore, most measures of Americans’ income growth are now almost twice the rate of inflation. Americans’ Average Hourly Earnings rose 3.7% year-over-year in April, substantially above the 3.2% 20-year average. The 10-month moving-average of Americans’ Average Hourly Earnings is currently 4.04%. 1998 was the only year during the 90s expansion that it exceeded current levels. I continue to believe the labor market will remain healthy over the intermediate-term without generating substantial unit labor cost increases.

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Bloomberg:
- Crude oil may fall next week as US refineries increase gasoline production in preparation for the peak-demand summer driving season, according to a Bloomberg survey of 34 analysts and traders.
- New Century Financial Corp. will close its sub-prime home-lending unit after failing to find a buyer.
- A US House panel voted to expand a federal agency’s powers to help low-income borrowers at risk of losing their homes as Congress pushes legislative fixes for the sub-prime mortgage problems.
- US Treasury Secretary Paulson said the low returns that Chinese earn on their savings are “perverse” and undermine the nation’s goal of stimulating domestic consumption. China’s savers are earning about 2.5% on their roughly $2 trillion of assets. That means savers must save more out of their income, rather than spend, to meet their investment goals, he said.
- The oldest gauge of US transportation stocks reached a record last week, with a boost from Warren Buffett. For Keith Wirtz at Fifth Third Asset Management, it’s a sign more gains are ahead for the overall market.
- The US dollar is headed for the biggest weekly gain in four months against the euro as strength in manufacturing and services suggested the Fed will refrain from cutting interest rates in coming months.
- BP Plc(BP) forecast today that capacity at the Cushing, Oklahoma, crude-oil storage terminal, where futures contracts traded in NY are delivered, will increase by 25% to about 50 million barrels within 18 months.
- Crude oil production in April by OPEC rose 50,000 barrels per day, a Bloomberg survey showed.
- Venezuela’s dollar bonds fell to the lowest in more than six months on concern that President Chavez’s decision to withdraw from the International Monetary Fund will cause a default on the country’s debt.
- Venezuelan President Chavez threatened to seize the country’s largest steelmaker, Siderurgica Del Orinoco, saying the company is a monopoly that refuses to supply some businesses.

Wall Street Journal:
- Ellington Management Group LLC won an auction today with a bid of $58 million for a parcel of mortgage loans and residual rights owned by New Century Financial Corp.

Financial Times:
- UK Prime Minister Tony Blair may seek to become the first president of the European Union when he leave office.
- One Equity Partners LLC, the US private equity group affiliated to JPMorgan Chase(JPM), is understood to have expressed an interest in buying EMI Group Plc in a deal that could value it at more than $6 billion.

Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (NT), target $35.
- Reiterated Buy on (QLGC), target $21.

Business Week:
- Bank of America Corp.(BAC) shares may rise 27% within a year, citing Carl Birkelbach, chairman and CEO of Birkelbach Investment Securities.
- Accredited Home Lenders Holding(LEND), a sub-prime lender, is a potential takeover target. Matthew Howlett of the investment firm Fox-Pitt Kelton Ltd. told the magazine a sale is the “most-likely” long-term option for Accredited.
- Monsanto(MON) will be a leader in agribusiness growth worldwide, citing Robert Levitt, founder and CIO of Levitt Capital Management.

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Economic Releases
8:30 am EST
- The Change in Non-farm Payrolls for April is estimated at 100K versus 180K in March.
- The Unemployment Rate for April is estimated to rise to 4.5% versus 4.4% in March.
- The Change in Manufacturing Payrolls for April is estimated at -14K versus -16K in March.
- Average Hourly Earnings for April are estimated to rise .3% versus a .3% increase in March.

BOTTOM LINE: Asian indices are higher, boosted by metal and technology stocks in the region. I expect US equities to open mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the day.

Stocks Finish Slightly Higher, DJIA Closes at Another Record

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Stocks Higher into Final Hour Ahead of Tomorrow's Jobs Report

BOTTOM LINE: The Portfolio is slightly higher into the final hour on gains in my Semi longs, Medical longs and Internet longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is slightly positive as the advance/decline line is slightly higher, almost every sector is rising and volume is heavy. The major averages and breadth are grinding to session highs on good volume. Gaming, retail and hospitals are the only real sources of any weakness. Technology, energy and transportation remain sources of strength today. I suspect tomorrow's non-farm payrolls release will come in around estimates of 100K, possibly a bit lower. The market should react in a positive fashion to the report, given other stronger economic readings of late. The 10-year yield is stable and my intraday gauge of investor angst is around average levels. While it is possible, I suspect someone other than Google (GOOG) will acquire Monster Worldwide (MNST), which is surging on buyout speculation. The fact that refinery utilization is near levels seen after Hurricane Katrina is temporarily propping up the energy complex. However, artificially inflated prices will just further exaggerate ongoing pervasive global demand destruction and raises the probability of substantial oil price declines in the future. I expect US stocks to trade mixed-to-higher into the close from current levels on positive earnings reports, better economic data, short-covering, falling energy prices and buyout speculation.