March 24th, 2011 7:16 AM by Lehel S.
Two data points this morning; weekly jobless claims were slightly better than expected, down 5K to 382K. Weekly claims continue to decline slowly nevertheless it is a plus for the economic outlook. Continuing claims fell to 3.721 mil frm 3.723 mil last week while the smoothing 4 wk average on claims declined to 385,250 frm 386,750, the lowest average since July 2008. Also at 8:30 but somewhat disappointing Feb durable goods orders; expected to be up 1.1% were reported down 0.9%. Taking the volatile transportation orders away durables were expected to be up 1.8% but were down 0.6%. Companies may be tempering their purchases of new equipment until further signs emerge that the recovery is broadening. Shipments of non-defense capital goods excluding aircraft, used in calculating gross domestic product, increased 0.8% after falling 2.3% in January.
Prior to the two 8:30 reports treasuries and mortgages were trading slightly weaker, stock indexes were slightly better. There was little reaction in both markets to the data; at 9:00 the 10 yr -6/32 3.37% +2 bp and mortgage prices -4/32 (.12 bp). At 9:00 the DJIA +61, crude oil at $106.11 +$0.37, gold up $1.50. Overall quiet again this morning, markets settling a little after the big swings on Japan and Libya.
Yesterday a lot was made of Portugal's parliament rejecting the austerity plans put forth by Portugal's Prime Minister; as he said he would if parliament rejected his plan, he tendered his resignation. There was a lot of talk that Portugal would drag the euro currency down but so far that has not occurred. A bailout for Portugal may total as much as 70 billion euros ($99 billion), said two European officials with direct knowledge of the matter. The country will follow Greece and Ireland needing a bailout. We do not expect any significant market reactions to the issue as it was generally expected and debt issues in Europe are not new news.
In Libya progress is being made; more bombings of ground forces and military equipment after clearing the skies. French Defense Minister Gerard Longuet said the coalition has intercepted conversations among Libyan officers indicating that many are ready to abandon the regime. Comments coming from coalition forces that the intervention may lasts days or weeks, but not months.
Later today (11:00 am) Treasury will announce the amounts for next week's 2 yr, 5 yr and 7 yr note auctions; last month the total $99B is likely what we will see next week also.
At 9:30 the DJIA opened +56, the 10 yr -8/32 3.37% +2 bp and mortgage prices -5/32 (.15 bp). So far this morning markets have been orderly and likely will continue that way the rest of the day. We continue to expect interest rates to struggle at these levels but the rate markets take their marching orders from the equity markets. The stock indexes are now back to where they traded prior to the earthquakes and tsunami in Japan that shook the world and is still causing serious problems with their nuclear power plants not yet under control.