Fed Beige Comments and Initial Jobless Claims

Hello! I was not able to post to blogspot for the last few months but looks like we have access to it again. Have a good day. _________________________________________________________________________________________Treasury prices dropped on Wednesday as better than expected earnings from large financial institutions drove early demand for equities. The DJIA traded above Tuesday’s closing level for most of the day only to fall into negative territory 40 minutes before the closing bell to finish down 92 points at 9,949. This reversal resulted in a spike in treasury prices but not strong enough to report a gain for the day. By the end of the day the 2-year note lost 2/32 to yield 0.95% while the 5-year lost 8/32s yielding 2.34%. The 10-year also reversed the negative trend in late afternoon trading yet still lost 12/32 to yield 3.38%. The long bond declined 23/32 yielding 4.21%. For the record, the Fed Beige Book, a summary of economic conditions in the 12 Fed districts over the past 6 weeks was released yesterday at 1:00pm CDT. The report, which only gives anecdotal information, stated that Fed districts saw modest gains in the economy; however, these improving conditions are not across all aspects of the economy as sectors like commercial real estate and banking continue to face a challenging environment; “Reports of gains in economic activity generally outnumber declines, but virtually every reference to improvement was qualified as either small or scattered…The weakest sector was commercial real estate, with conditions described as either weak or deteriorating across all Districts. Banking also faltered in several Districts.” Fed Beige Book, October 21st 2009 Treasuries are trading lower this morning as unemployment concerns continue to take center stage with a worse than expected Initial Jobless Claims report. The 5-year note has lost 6/32 to yield 2.39% while the 10-year Treasury note is currently trading 15/32 lower to yield 3.44%. The long bond has declined 26/32 so far, yielding 4.26%. For the record, the Department of Labor released its weekly Initial Jobless Claims report showing that last week’s claims rose by 11,000 (from the revised 520,000 recorded for the previous period) to 531,000; analysts were expecting a 515,000 number. Continuing claims dropped 98,000 to 5.923 million. Contrary to the weekly data however, the less volatile 4-week moving average of initial claims reported a decrease, although marginal, of 750 from the reported 533,000 for the previous week. The Initial Jobless Claims number continues to be one of the key factors, along with inflation, in investors’ minds as this economic recovery is yet to show concrete signs of an improving labor market (usually a lagging indicator). In other economic releases for the day, the Leading Economic Indicators, an aggregate index of ten economic indicators designed to predict economic activity six to nine months in the future, will be released at 9:00am CDT. The previous 5 readings have shown signs of economic improvement and analysts are currently forecasting the index to continue that trend and report a 0.80% change for the month of September, 0.20% higher than in August.