The 4-week average of Initial Jobless Claims continues to drop

Treasury prices plummeted on Wednesday, reversing a 3 day gain, as U.S. stocks rallied after a strong performance in European markets and a better than expected ADP Employment number brought investors back into equities. For the record, the Dow Jones Industrial Average rose 249 points to reach 11,255. Meanwhile, Treasuries lost significant ground, especially on the intermediate and long end of the curve. The 2-year note lost 5/32 to yield 0.53% while the 5-year dropped 26/32 to yield 1.64%. The 10-year note eroded 1 13/32 point to reach its highest yield since July of this year at 2.96%. Finally, the 30-year bond declined 2 7/32 point yielding 4.24%.

The Fed Beige Book was also released yesterday, and in another supportive factor of the economic recovery, the report stated that all Fed districts but Philadelphia and St. Louis, saw modest to strong gains in the areas of manufacturing, services, retail sales and consumer spending. However, the report also mentioned that the housing market remains weak, with Philadelphia, Atlanta, St. Louis and Minneapolis reporting a further drop in home sales. The report also mentioned that most districts are optimistic on the holiday shopping season.

“Reports from the twelve Federal Reserve Districts indicate that the economy continued to improve, on balance, during the reporting period from early/mid-October to mid-November. Economic activity in the Boston, Cleveland, Atlanta, Dallas, and San Francisco Districts increased at a slight to modest pace, while a somewhat stronger pace of economic activity was seen in New York, Richmond, Chicago, Minneapolis, and Kansas City. Philadelphia and St. Louis reported business conditions as mixed. Fed Beige Book, Dec 1^st 2010

Treasury prices continue yesterday’s trend as market participants react to this morning’s Jobless Claims report. Currently, the 2 year note has dropped 1/32 to yield 0.53% while the 5-year note has lost 2/32 yielding 1.65%. Meanwhile, the 10-year note has declined 6/32 in value to yield 2.99% and the 30-year bond is trading 8/32 lower to yield 4.26%. Providing mixed signals on the labor market recovery, this morning’s release of the Initial Jobless Claims report by the Department of Labor showed that first time claims rose more than expected during the latest week to 436,000; analysts were expecting claims to only increase to 424,000. However, the more stable 4-week average number of initial claims continues to drop this time reaching 431,000 versus the 436,750 number registered previously. Additionally, Continuing Claims also rose more than anticipated 4.270 million versus the expected 4.200 million. This represents an increase of 53,000 from the previous week, which was upwardly revised to 4.217 million versus 4.182 million.

Pending Home Sales will be released at 9:00 am CST. Pending Home Sales, which tracks the number of home resales under contract, is expected to have decreased 1.00% for the month of October. This index is often used as a gauge to predict future home sales activity as these sales usually become existing home sales one or two months later.