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Thursday, July 9, 2009

Morning Market Report

The markets were relatively mild up until the last couple hours. The most market shaking event came in the bond market. The three year auction went off spectacularly well. It caused all bonds to improve dramatically. The Ten Year U.S. Treasury, for instance, wound up losing fifteen basis points to 3.29%. Now, mortgage rates are also again below 5.5% on the 30 year mortgage. Oil was down nearly two dollars a barrel as well falling near $60 per barrel. Equities were down most of the day before pulling out of it with both the Dow and the NASDAQ up slightly while the S&P was down marginally. Alcoa came out with much better than expected numbers coming in with loss of 26 cents a share while the consensus was 38 cents a share in losses.

The markets in the Far East were mixed. The Hang Seng was up .39%, the Japanese NIKKEI was down 1.38%, while the Straits Times Index in Singapore was up 2.12%. In Europe, all markets were up. The London FTSE was up by .83%, while the DAX lead the way up 1.67%, and the index in SPAIN was up 1.21%.

Oil looks to be up at the open currently trading at just over $61 per barrel. All the major indices look to open slightly up. The Dow is up about 34 in futures, the NASDAQ is up 5 in futures trading, while the S&P is also 5 in futures trading.

The Dollar hit is mixed this morning. It's trading better slightly (up .25%) against the Yen, while losing value against the British Pound, the Euro, and the Candian Dollar.

There's also breaking news from the jobs front.

The number of Americans filing claims for unemployment benefits fell last week to the lowest since January, as early automotive plant closures altered the timing of layoffs that typically happen at this time of year.

Initial jobless claims fell by 52,000 to 565,000, a lower level than forecast, in the week ended July 4, from a revised 617,000 the prior week, the Labor Department said today in Washington. Meanwhile, the number of people collecting unemployment insurance jumped to a record in the prior week.

at the same time...

But in a sign of ongoing employment weakness, so-called continued claims of people still on jobless aid after an initial week of benefits rose by 159,000 to a record 6.883 million in the week ending June 27, the latest for which data is available.

As such, less people are losing work but those without work are still not finding a new job. In what has become a broken record, here's what one so called expert said of the latest numbers.

Job losses lessening is a sign that the worst is over, but it doesn’t mean the labor market will get better in a hurry,” Michael Gregory, a senior economist at BMO Capital Markets in Toronto, said before the report. “It’s going to keep consumer spending depressed. People will be reinstating the term ‘jobless recovery.’”

I've lost track of how many times a so called "expert" has proclaimed that some piece of data means "the worst is over". I think we'll be hearing something like this well into next year.

Meanwhile, June retail sales numbers disappointed.

My analysis:

Today is a perfect example of why I only look at GDP, monthly unemployment numbers, and inflation. All of the data released just today could be read in any which way. The Treasuries are still what I am watching. The lower their rate goes the better it will be for everything else. Lower treasury rates have filtered to mortgage rates. Look for real estate activity to pick up again. Real estate is where the recession started and it's still the key to the recovery.

That said, all of this is short term. The lower rates should spawn some short term economic activity and that will grow interest rates. This is the economic yo yo that I have already talked about. What the market needs is sustained low mortgage rates that aren't manipulated lower. There's no evidence that this is going to happen anytime soon.

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