ADP Employment Numbers: Prior 216k, Market Expects 217k, Actual 209k

“The negative market reaction to signs that the Federal Reserve is unlikely to take part in more quantitative easing soon has led to worries that the market rally will fade.

Caroline Purser | Photographer’s Choice | Getty Images

Markets have rallied this year after the Fed’s Operation Twist and two rounds of liquidity injections from the European Central Bank. Some had expected a third round ofquantitative easing  from the Fed later this year, but these hopes were dampened by the news that only two of the Fed’s 10 board members backed further easing at its most recent meeting.

“Markets are only going up because of central banks’ extraordinary measures and the underlining economy is struggling with severe headwinds,” Stewart Richardson, partner at RMG Wealth Management, told CNBC Wednesday.

“If we don’t get any more QE from the Fed  or LTRO from theECB  , markets will take a step back and reassess why they’re going up.”

He warned that recent U.S. economic data has been buoyed by the weather and seasonal variations, and data in coming months may show “stall speed”.

Others argue that recent U.S. data suggests that the massive amount of cheap money pumped into the economy has revived it enough….”

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Under the auspices of jobs, commerce, and tourism dollars, America is lowering its guard when it comes to gambling.

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“Looking back over the latest few weeks of economy data, something stands out: Things are playing out almost 100% different than what people expected.

Think back to mid-to-late February. There were two competing trends. Housing appeared to be creaking back to life, construction was generally jumping, and car sales were surging month after month. Basically, all the “big” animal spirits stuff seemed to be happening.

But there was a counter-force in the form of gasoline prices. They were surging, and the big fear is that just as things were creaking back to life, gasoline prices would come in and slug the consumer.

As we pointed out, the fact that there was a duel between the big stuff (cars and houses on one side) and the day-to-day stuff (gasoline prices threatening the consumer) is what made the current environment very different form 2007-2008, the last time the economy went into recession.

We thought we’d be watching closely the high-frequency indicators, like same-store sales numbers and initial claims to get the first signs of problems, but that hasn’t been how things have developed at all.

The weekly retail data has been great. Today’s number was one of the best in a year. We had a few dicey weeks right when the gas surged, but everything’s hunky dory on this front.

On the other hand, the big stuff has been not good.

Every single piece of recent housing data has been a miss.

And then today, it came out that the March auto sales numbers dipped sharply from February.

Also, construction numbers beyond housing have been poor.

So basically, the high-frequency consumer stuff has been fine, and the big money, investment stuff has backslid.

Frankly we’d rather have it be the other way, though this is just a few weeks worth of data, and you don’t want to read too much into a handful of numbers.”

“Chevron Corp. (CVX) and Transocean Ltd. (RIG) are being sued for another 20 billion reais ($11 billion) by a Brazilian federal prosecutor in a new lawsuit over a second oil spill at the Frade field off the nation’s coast.

Chevron committed “a series of errors” that led to the March spill at the project, the federal prosecutor’s office said in an e-mailed statement yesterday. Prosecutor Eduardo Santos de Oliveira is also seeking to halt operations at Frade and block Chevron from transferring profitsfrom Brazil, according to the statement.

“The oil spill at the Frade field hasn’t been contained,” Oliveira said in the statement. “The damages to the environment and to Brazil’s natural resources are incalculable at this point,” he added….”

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“Bayerische Motoren Werke AG (BMW)’s BMW brand, helped by a redesigned 3 Series sedan and a March sales increase of 18 percent, finished the first quarter with 36 more deliveries thanDaimler AG (DAI)’s Mercedes-Benz in the U.S.

Sales gains by both BMW and Mercedes last month indicate that the battle to be the top-selling luxury brand in the U.S. will continue through 2012 as inventories and new products arrive in dealerships. BMW took the top spot last year with a lead of just 2,715 units over its German rival….”

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Factory orders in Germany came in less than expected….

A lack of global coal demand took down Australia’s trade deficit for a second month…

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“ORIGINAL: At 7:45 AM, the European Central Bank will make its April monetary policy decision.

Investors expect the bank to keep interest rates on hold at 1.00 percent and ignore calls for a third three-year long-term refinancing operation.

That liquidity operation doled out €1.019 trillion ($1.343 trillion) in cheap cash to commercial European banks and generated much of the euro-area enthusiasm over the last few months.

Regardless of the fact that we’re not likely to see any major changes from the ECB, Barclays analysts say that we could see President Mario Draghi hint at the bank’s future strategy in a press conference following the announcement at 8:30 AM EST. Recent commentary suggest that the ECB is looking to get out of its massive liquidity operations.

Barclay analysts wrote on Monday (emphasis added):

In a recent speech, the President Draghi stressed the difference between different concepts of liquidity, pointing out that the impact on inflation and asset prices comes from a “sustained and strong increase in money and credit” and not from the central bank liquidity per se (i.e. liquidity borrowed at the refinancing operations). At the moment there is no strong evidence of the transfer of central banks’ liquidity in money and credit, as was also evidenced by the February M3 data on bank lending to the economy, which remained weak with only a moderate recovery in the monetary aggregate (although this did not capture the second 3y LTRO)…

The fact that the ECB’s rhetoric has shifted towards the potential inflation risks coming from the abundance of liquidity currently in the system, is probably a signal that it is preparing its gradual exit strategy.

So far, Draghi has seemed willing to alleviate pressure on sovereigns so long as they made fiscal adjustments, but he might be willing to allow pressure to resume amid EU leaders’ foot-dragging.

UPDATE: The ECB surprises no one and leaves interest rates unchanged at 1.00 percent. Let’s see if we hear anything more at Draghi’s 8:30 AM EST presser. (We’re not holding our breaths.)”

Gold is down $43 @ $1,628

Oil is down $0.91 @$103.11

The dollar

EUR / USD

Global markets are said to be down due to a potential halting of fed easing…

“Spanish notes led losses in European sovereign debt markets after demand fell and borrowing costs rose in the nation’s first auctions since announcing that public debt will surge to a record this year.

The declines pushed the yield on Spanish five-year notes to the highest in 12 weeks, while similar-maturity Italian debt slid and Greek 10-year bonds fell. Benchmark German bunds erased an intraday drop as the nation sold securities due in February 2017. The European Central Bank will leave its main refinancing rate at a record low 1 percent today, according to all 57 economists in a Bloomberg survey.

“The auction reflects market disappointment with recent fiscal policy” in Spain, Luca Jellinek, head of European interest-rate strategy at Credit Agricole Corporate & Investment Bank in London, wrote in an e-mailed report. “The immediate post-auction price action is bearish. This kind of price action in the periphery is clearly supportive for German bunds.”

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By Michael S. Derby

The Federal Reserve should continue to provide stimulus aggressively to the economy, a U.S. central bank official said Tuesday.

But in light of the recent improvement in the economy, the policy maker, John Williams of the Federal Reserve Bank of San Francisco, didn’t discuss the possibility the central bank will have to consider delivering even more stimulus, as he has in past remarks.

“It’s essential that we keep strong monetary stimulus in place,” Williams said in the text of a speech that was to be delivered before a gathering held at the University of San Diego School of Business Administration. “High unemployment, restrained demand and idle production capacity are national in scope. These are just the sorts of problems monetary policy can address.”

But unlike in past speeches, Williams, a voting member of the monetary-policy-setting Federal Open Market Committee, didn’t discuss the potential need for the Fed to go beyond what is already planned.

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With the U.S. economy yielding firmer data, some researchers are beginning to argue that recoveries from financial crises might not be as different from the aftermath of conventional recessions as our analysis suggests. Their case is unconvincing.

The point that all recoveries are the same — whether preceded by a financial crisis or not — is argued in a recent Federal Reserve working paper by Greg Howard, Robert Martin and Beth Anne Wilson. It was also discussed in a recent article in the Wall Street Journal.

It is mystifying that they can make this claim almost five years after the subprime mortgage crisis erupted in the summer of 2007 and against a backdrop of an 8.3 percent unemployment rate (compared with 4.4 percent at the outset of the financial crisis). Our research makes the point that the aftermaths of severe financial crises are characterized by long, deep recessions in which crucial indicators such as unemployment and housing prices take far longer to hit bottom than they would after a normal recession. And the bottom is much deeper. Studies by the International Monetary Fund concluded much the same.

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(CBS News) In the escalating battle between the administration and the judiciary, a federal appeals court apparently is calling the president’s bluff — ordering the Justice Department to answer by Thursday whether the Obama Administration believes that the courts have the right to strike down a federal law, according to a lawyer who was in the courtroom.

The order, by a three-judge panel of the U.S. Court of Appeals for the 5th Circuit, appears to be in direct response to the president’s comments yesterday about the Supreme Court’s review of the health care law. Mr. Obama all but threw down the gauntlet with the justices, saying he was “confident” the Court would not “take what would be an unprecedented, extraordinary step of overturning a law that was passed by a strong majority of a democratically elected Congress.”

Overturning a law of course would not be unprecedented — since the Supreme Court since 1803 has asserted the power to strike down laws it interprets as unconstitutional. The three-judge appellate court appears to be asking the administration to admit that basic premise — despite the president’s remarks that implied the contrary. The panel ordered the Justice Department to submit a three-page, single-spaced letter by noon Thursday addressing whether the Executive Branch believes courts have such power, the lawyer said.

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Daniel Halper

Dean Singleton, chairman of the Associated Press board, introduced President Obama this afternoon at a speech to news editors in Washington. But Singleton didn’t just tell the audience the president was the next speaker—the supposed newsman offered lavish praise for the Democratic president.

“President Obama made history as the first minority to be elected president,” said Singleton. “Even many who opposed his election felt proud of our country as he took the oath of office.”

Singleton went on to detail the challenges Obama faced, much in the same way Obama himself details his own presidency (the transcript is rushed, there may be small errors):

As president, he inherited the headwinds of the worst economic recession since the great depression. He pushed through congress the biggest economic recovery plan history and what a government reorganization of two of the big three American automakers to save them from oblivion. He pursued domestic and foreign policy agendas that are controversial to many, highlighted by his signature into law of the most comprehensive health care legislation in history. The budget plan’s proposed by the president on the one hand and republicans on the other hand are not even on the same planet. Many democrats believe his agenda doesn’t go far enough and many republicans believe it goes way too far. While we fought be to doubt — while we thought the 2008 white house race was rough and tumble, the 2012 race makes it look like bumper cars by comparison our country has become even more polarized. The 1 percent and the 99 percent are at each other’s throats.  Campaigns are now funded by secretive, multimillion-dollar super PACs. The only thing anybody seems willing to compromise on is — I can’t think of anything. [laughter] really, who would want this job in the first place?”

“We are honored today to have the man currently holding the office and aspiring for another term,” said Singleton before finally announcing the president himself.

Indeed, it sounded like a campaign speech from AP chief himself.

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“This bears on your reporting,” President Obama said to journalists. “I think that there is oftentimes the impulse to suggest that if the two parties are disagreeing then they’re equally at fault and the truth lies somewhere in the middle. And an equivalence is presented which I think reinforces peoples’ cynicism about Washington in general. This is not one of those situations where there’s an equivalency.”

“As all of you are doing your reporting, I think it’s important to remember that the positions that I am taking now on the budget and a host of other issues. if we had been having this discussion 20 years ago or even 15 years ago … would’ve been considered squarely centrist positions,” Obama said a few moments later.

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