NEW YORK ( TheStreet) -- First-quarter earnings season has exceeded Wall Street's low expectations but now the economic data will need to cooperate if stocks are going to rally much further from here.

Wednesday's mixed session was the equivalent of treading water. The shortfall in the Automatic Data Processing private payrolls report was especially surprising after Tuesday's strong read on manufacturing activity from the Institute for Supply Management, and economists and traders alike were struggling to reconcile the two.

Paul Ashworth, chief U.S. economist at Capital Economics, broke down the mixed message in the data and what it may mean for Friday's government employment numbers in commentary on Wednesday.

" The ADP survey suggests that manufacturing employment shrank by 5,000 last month, compared with a 23,000 increase in March, whereas the employment index in the ISM survey continued to strengthen last month," Ashworth wrote. "Obviously, the weak ADP reading means that there are now clear downside risks to our estimate that the official non-farm payroll employment figures will show a 175,000 gain. Indeed, it is possible we could see a repeat of March, when payrolls increased by only 120,000."

The disconnect in the data explains why the major U.S. equity indices stalled out on Wednesday with investors unsure what to give the most credence. Corporate earnings were strong enough to get stocks out of their recent rut but the overall results (and guidance) are still more solid than stupendous. That won't be enough to inspire more buyers at these levels.

"With the 1Q reporting season largely complete, we believe most earnings-related news has already been priced into the market," wrote Jonathan Golub, strategist at UBS, on Wednesday. "As a result, we expect investors to begin shifting their focus from corporate profits to incoming economic data. Notably, while strong earnings have carried stocks higher through the latter half of April, broader economic readings have been more mixed."

Golub maintained a year-end price target of 1475 for the S&P 500, an increase of more than 5% from Wednesday's close at 1402, but he's expecting the week's two remaining big economic reports -- Thursday's ISM services index and Friday's official jobs report for April -- to "set the market's tone" for May.

Meantime, Sam Stovall, chief U.S. equity strategist at S&P Capital IQ, is expecting volatility to pick up in the near term. He summed up his take on the recent economic data as "one step forward, two steps back" and thinks investors may be in for more disappointment on Friday when the jobs report finally arrives.

"Earlier payroll gains were likely a combination of accelerated hiring due to warmer-than-normal weather, as well as corporate America's need to play catch-up after incorrectly assuming a limited pick-up in aggregate demand," he wrote. "We therefore think equity markets may remain choppy in the near term, due to Friday's numbers and upcoming French and Greek elections that could unseat those who have already embraced austerity."

As for Thursday's scheduled news, Dow component Kraft Foods ( KFT) is slated to report its first-quarter results after the closing bell, and the average estimate of analysts polled by Thomson Reuters is for earnings of 56 cents a share in the March-ended period on revenue of $13.05 billion.

The big news at Kraft, of course, is the company's plan to split into two separate publicly traded entities with the North American grocery products company retaining the Kraft Foods name and the global snack foods company to be called Mondelez International. The separation is expected to be completed by the end of the year.

Kraft's stock is up more than 6% so far in 2012 and 17.5% in the past year, hitting a 52-week high of $39.99 on Tuesday, so the company doesn't have a lot of leeway for a miss. The sell side is very bullish with 13 of the 18 analysts covering the stock at either strong buy (6) or buy (7) and the median 12-month price target sitting at $44, implying potential upside of X% from Wednesday's close at $XX.XX.

At current levels, the shares are trading at a forward price-to-earnings multiple of 14.2X, slightly more expensive than 13.3X for the S&P 500 as of Friday's close. The stock's forward annual yield is a healthy 2.9%.

JPMorgan boosted its rating on Kraft on Monday, going to overweight with a $45 price target, citing a belief that the dividend yield for the grocery company's stock will be above 4%, possibly even approaching 5%. The firm also said the sum-of-the-parts valuation remains appealing.

"Our analysis suggests in an average year, GroceryCo will be able to pay over 60% of its free cash flow toward dividends and still have between $500MM and $1B left to pay down debt," JPMorgan said, adding later: "Indeed, we think GroceryCo's yield could attract income investors and lead to a better P/E multiple than most domestic, slower-growth companies typically receive."

The firm is expecting earnings of 59 cents a share from Kraft in the first quarter, 3 cents above the consensus, and thinks the upcoming split could actually bring some buyers into the name.

"Besides our optimism about fundamentals, we also think Kraft will push hard to drive strong earnings into one of the most important investor events in its history: The pending separation of GroceryCo and SnackCo, scheduled for 4Q12," JPMorgan said. "Speaking of the split, we think it is possible that event-driven investors gain interest in KFT as the separation -- scheduled for 4Q12 -- approaches."

S&P Capital IQ is bullish on Kraft ahead of the report as well, reiterating its buy rating on Wednesday and boosting the price target to $44 from $42.

"As the expected split-up approaches, we look for the stock to increasingly benefit from sum-of-the-parts valuation, with the snacks business receiving a higher P/E," the firm said. "Also, we think KFT shares are benefiting from strength in the recent Q1 from Hershey ( HSY)."

Check out TheStreet's quote page for Kraft Foods for year-to-date share performance, analyst ratings, earnings estimates and much more.

Other notable reports on Thursday include General Motors ( GM) and LinkedIn ( LNKD).

The early reporters on Thursday will include 1-800 ( FLWS), Apache ( APA), Build-A-Bear Workshop ( BBW), Cablevision Systems ( CVC), Cardinal Health ( CAH), Checkpoint Systems ( CKP), CIGNA ( CI), Corinthian Colleges ( COCO), El Paso ( EP), Elizabeth Arden ( RDEN), Gildan Activewear ( GIL), James River Coal ( JRCC), K-Swiss ( KSWS), Lear Corp. ( LEA), Level 3 Communications ( LVLT), Lifetime Brands ( LTM), Orbitz Worldwide ( OWW), Progress Energy ( PGN), Sara Lee ( SLE), Sealed Air ( SEE), Steve Madden ( SHOO), Viacom ( VIA), and World Wrestling Entertainment ( WWE).

The late roster includes Active Network ( ACTV), American International Group ( AIG), Caribou Coffee ( CBOU), Digital River ( DRIV), Dole Food ( DOLE), First Solar ( FSLR), Hain Celestial ( HAIN), Leapfrog Enterprises ( LF), Limelight Networks ( LLNW), Monster Worldwide ( MNST), Powerwave Technologies ( PWAV), SandRidge Energy ( SD), Spreadtrum Communications ( SPRD), and Zagg ( ZAGG).

Thursday's economic calendar includes weekly initial and continuing jobless claims at 8:30 a.m. ET; the Challenger, Gray & Christmas monthly layoffs survey for April at 7:30 a.m. ET; the preliminary read on non-farm productivity and unit labor costs for the first quarter at 8:30 a.m. ET; and the Institute for Supply Management services index for April at 10 a.m. ET.

And finally, Green Mountain Coffee Roasters ( GMCR) was the big loser after the closing bell, plunging more than 40% in Wednesday's extended session.

The company reported a revenue shortfall in its fiscal second quarter and gave an outlook for the whole of fiscal 2012 that's well below the current average analysts' expectations. Green Mountain sees non-GAAP earnings of $2.40 to $2.50 a share vs. the average estimate of analysts polled by Thomson Reuters for a profit of $2.67 a share.

The stock was last quoted at $28.45, down 42.5%, on heavy volume of more than 14.5 million, according to

-- Written by Michael Baron in New York.

>To contact the writer of this article, click here: Michael Baron.

Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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