Weekly Unemployment Claims hit the tape up 11K to 444K. Economist were looking for a much smaller gain of plus 3K. Continuing Claims fell 141K to 5.002 million. The trouble with both of the indexes is that seasonal adjustments can skew the numbers. Taking a deeper look at the “unadjusted” continuing claims number, we find that they rose 185K. Expectations are for the seasonal factors to work their way out of the system over the next few weeks. From our view, employment is still our economic priority and not going anywhere fast.
Retail Sales also disappointed, falling .3% with the ex-autos component down .2%. Gasoline station receipts were the only positive, up 1.0%. The market was looking for a better number, given high hopes of a better holiday season. We see the negative December reading as unsettling, reflecting a consumer that has started to spend but at a snail’s pace.
Results of 30 year bond auction just hit the tape. 4.64% yield, 2.68 to 1 bid to cover, Indirect bidders took 41%, and best of all, the issue was bid 4 bps “through” the screen, telling us that demand was very good. Looks to us like a good technical setup along with bond bullish data (early today) helped to support the auction. Give it an A-.
Currently, the 10 year note is up 18/32’s (yield 3.71%), mortgage backs are plus 7/32’s on the lower interest rates but only up 3/32’s on the premium priced loans. Mortgage pricing stuck at plus 3/32’s on FNMA 4.50% securities. We’ll become more friendly to the market if we can close at this level or better (3.71% yield or lower) as the technicals will support a more neutral chart with a bullish bias. Keep in mind that the winds on Wall Street can change very quickly.
