Tons of news this morning starting with Weekly Unemployment Claims which fell 16K to 385K. Continuing Claims fell 80K to their lowest level since September 2008. Both numbers surprised the market a bit as they were well below consensus. Next up was CPI, inflation at the consumer level. That index rose .5% headline and .2% core index after you strip out food and energy. The release was not quite as hot as yesterday’s PPI index but just the same, inflation seems to be creeping back into the pipelines, especially in food and energy. Industrial Production figures were also released, down .1% for the first time since October 2010. Capacity Utilization was off .1 to 76.3, telling us that there is still considerable slack in the economy. The Chicago Fed manufacturing index hit the tape as well, up 1.1% to 84.1. The auto component of this index led the way, jumping 4.2%. All of the above paints a mixed picture of the economy, yet one that leans of the side of expansion. The data however, is taking a back seat to radiation issues in Japan, geo-political concerns in the MENA (especially Bahrain and Libya), and sovereign debt issues in Euro land. The outcome of six Japanese nuclear reactors has people and the markets riveted. “If” they can contain them, the markets will settle down. “If not,” things will get extremely volatile. Stocks, which have been slipping 6 of the last 8 days, finally caught a break. Strong buying off good support following a 7% correction has done the trick. Dow plus 170, Naz plus 42. Strong stocks have taken a bite out of bonds, sending the 10 year note lower by 21/32’s. Mortgage backs have followed suit, down 13/32’s as I type. We have also just taken out my bullish uptrend line on the 60 minute chart. That is not the end of the world but a close at the lows (high yields) would put us back on the defensive. With the run up (rally) in mortgage pricing build on flight to safety buying, a reversal would not be a surprise. Have a great day and may the luck of the Irish be with you!
Scott Eggen
SVP, Capital Markets
PrimeLending, A PlainsCapital Company
18111 Preston Road, Suite 900
Dallas, Texas 75252
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