market-chart-2009Weekly Unemployment Claims hit the tape this morning, up 35K to 626K while Continuing Claims rose to a record 4.788 million. It’s interesting that in each case the current data is bumping up against or surpassing record high levels that were hit in the fall of 1982. That period marked the peak of jobless claims as we began to pull out of the recession in the early 1980’s.

History doesn’t repeat itself but it sure does rhyme.
Mark Twain

Preliminary 4th Quarter Productivity was also released, up 3.2%, much higher than expected. Trouble is, the number is smoke and mirrors as the hours worked declined by 8.4%, pushing productivity higher. Kind of like doing more with less while receiving less compensation. Sound familiar?

Factory Orders completed the hat trick, falling 3.9% overall and 4.4% ex-transportation. No need to kick that number when it’s down.

Market reaction to all of the above has been muted for bonds, mortgage backs, and stocks. After a lower open, stocks have pulled themselves back on the plus side (up 28 points). Mortgage backs are up 1 or 2/32’s, and the 10 year note is plus 3/32’s (yield 2.90%).

Technically, the bears took the market right to the cliff yesterday but couldn’t throw it over. Notice how on 12/1 (see chart), the market made a low and then rallied for 7 points. Yesterday, we retested that level but could not take it out. This market is not out of the woods by any means but the potential for a nice rally to develop is clear.

For this rally to happen, the market must maintain a yield on the 10 year note of 2.98% or less. I like the odds of this happening due to the poor economic climate and the current administration struggling to find a clue. If they screw this up (new stimulus, etc.) stocks will hate it and probably take a look at 7000 on the Dow. Given that outcome, a flight to quality bid in treasuries will develop, hauling MBS along for the ride. If they somehow get it right, stocks will like it and housing/financial sector companies will like it, probably lowering mortgage rates as part of the New New Deal.

FDR is probably rolling over in his grave. More on our employment report “guess” this afternoon.