[Dan]

The equity market roared ahead to a four-month high – with the S&P 500 up 1.7% to 919.5 – best close since January 6th, which was the high for the year. Financials soared 8% and have now DOUBLED from their March lows – helped by preliminary reports of the stress test, which showed the banks to be healthier than anticipated, and even the less-than-healthy apparently in need of less capital than many had factored in. It is difficult to square the IMF findings of $2.7 trillion of projected losses with these results, except to say that when push comes to shove, the ‘adverse’ scenario in the stress test, if that is indeed a ‘worst case’ scenario, is hardly onerous. But it was a great day all around – gold popped $13.70/oz to break back above the 50-day m.a. of $909.40; the CRB jumped to a six-month high of 237.48; oil rallied $2.50/bbl to $56.34/bbl; even the 10-year T-note yield managed to edge down one whole basis point to 3.15% – the auction went well – as it hugs the 200-day moving average. Two-year swap spreads came in to 47 bps, the lowest they have been since Aug/07 (according to Bloomberg) and the TED spread is south of 80 bps. Cyclically sensitive currencies like the Canadian dollar have soared to their best levels since last November. In a sign of the times, Cisco beat its EPS estimates but all on aggressive cost-cutting measures – revenues were actually in line with Street expectations.

We certainly have reached a whole new grading system on the economy when investors rejoice at a 491,000 plunge in ADP employment. Yes, this was better than the consensus estimate of 645,000, but think about it – it was the sixth-worst ADP number on record. But the risks of an “upside” surprise in nonfarm payrolls (less negative report) are now running pretty high – the Monster employment index just came out and eked out a 2 point gain to 120 and while it is not seasonally adjusted, the plunge from 150 last October to 118 in March did foreshadow the massive slide in payrolls over that period. Bloomberg News is also running with an article indicating that temp agency shops had a better April compared to March.