Ashland Condominiums

Bond traders focused on the positive and ignored the negative on Thursday. Bond-friendly reports ignited strong buying that sent prices on U.S. Treasury securities up and their yields, which move in the opposite direction of prices, down to their lowest levels since July 28. A report from the Ministry of Finance in Japan got things going. It stated that for the week ended August 12 Japanese investors bought $1.39 billion worth of government debt - the most in three weeks. Since Japan is the largest foreign holder of Treasuries, this was good news indeed. Higher yields than those offered by other countries make Treasuries an attractive investment. A rise in unemployment claims and a dip in future expectations also fed into the rally. Although Treasury yields fell, mortgage rates stubbornly held at recent levels.

First-time unemployment claims for the week ended August 12 rose by 6,000 to 316,000, exceeding estimates of a climb to 310,000 from an unrevised 306,000 the previous week. In addition, the more closely watched four-week average rose to 312,750 and continued claims, people collecting benefits for more than one week, edged up to 2.59 million. Any signs of softness in the labor market support Treasuries, as traders feel that a weak labor data could stall the Fed's rate hike program. In a separate report, in Index of Leading Economic Indicators (LEI) rose 0.1 percent in July, which was in line with forecasts but significantly below the June increase of 0.9 percent. LEI looks at economic conditions three to six months down the road.

The Philly Fed survey on manufacturing climbed to 17.5 in August from 9.6 in July - eclipsing the 14.5 that analysts were expecting. A big increase like this would generally spur selling, but there was a caveat within the report that calmed traders. The 'prices received' component took a dive, falling to 3 from 12 - the lowest level in two years. This took the pressure off. Oil prices were not a factor today, as they recouped early losses and closed up by only 2 cents.

Stocks Wander, Close Mixed

Activity on Wall Street lacked conviction on Thursday with the Nasdaq composite trading in negative territory almost all session save one mid-day blip into positive territory. The Dow Jones Industrials opened in negative territory and then climbed well above breakeven, but closed off their high of the day. Just over one-third of the Dow components closed positive, but one of them was Altria, which climbed 3.73 percent after receiving a favorable court ruling in Illinois regarding a tobacco lawsuit. Consumer products manufacturers Johnson & Johnson and Procter & Gamble each added better than 1 percent, but other gains were small. Losses were also modest, with only four of the 19 components posting losses dropping more than 1 percent.

Pressure on the equity markets emanated from a couple of key earnings reports that set a bearish tone. Limited Brands reported lower profits and it also decreased earnings guidance for the year, stoking worries about consumer spending. Hot Topics, which sells teen apparel, fell 10 percent when it missed forecasts. On the tech side, Google lost 1.8 percent the day before the first anniversary of its IPO on word that it has filed to sell up to 14.16 million shares of common stock. No tears for Google, however, as it closed 1 cent below $280 a share - a gain of 229.41 percent in its first year as a public company. Salesforce.com, a manufacturer of customer service software, lost 10 percent after missing forecasts.

The tech bellwethers had a tough day, with only Sun Microsystems closing with a gain - up 0.55 percent. JDS Uniphase gave back yesterday's gain and more, dropping 3.8 percent, while Cisco Systems, Oracle and Ericsson each shed more than 1 percent.

At closing: The Dow 30 Industrial Index firmed 4.22 points or 0.04 percent to 10,554.93; the Nasdaq Composite index lost 9.07 points or 0.42 percent to 2,136.08, and the benchmark Standard & Poor's 500 Index dipped 1.22 points or 0.10 percent to 1,219.02.

The 30-year Treasury bond had rallied 1-0/32 in price with the yield falling to 4.41 percent versus 4.47 percent at Wednesday's close.

The 10-year Treasury note gained 17/32 in price with the yield dropping to 4.20 percent from 4.27 percent at Wednesday's close.

The 5-year Treasury note rose 10/32 in price with the yield declining to 4.06 percent from 4.13 percent at Wednesday's close.

AVERAGE mortgage rates (zero discount points) based on rates collected nationwide were:

The 30-year Conventional Fixed-Rate Mortgage was at 5.659 percent from 5.651 percent at Wednesday's close.

The 15-year Conventional Fixed-Rate Mortgage was at 5.271 percent from 5.272 percent at Wednesday's close.

Coming Up

After Thursday's full slate of economic reports, Friday features a dearth of data. Looking into next week, the market spies Tuesday's National Association of Realtor's report on July existing home sales, which are expected to slip to an annual rate of 7.25 million units. On Wednesday, a report on July orders for U.S. durable goods, big-ticket items intended to last three or more years, is expected to show a decline of 0.6 percent. Also on Wednesday, the market will see the Commerce Dept.'s July data on new home sales, expected to dip to a 1.325 million unit annual rate.

Given Thursday's drop in Treasury yields, mortgage rates on some products have room to edge back down.

Carolyn Siegel

carolyn@interest.com

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