This is our 3^rd day of rate increases; assuming rates continue in this morning’s trend. The 10-year Treasury is +.032% with the rate at 4.678%.

Rates opened a bit lower before the market had much of a chance to look at the all the data. Most likely its opening was a response to a far lower Unit Labor Costs.

The market reversed course soon into trading as it responded to both a drop in Productivity and more important a drop in the weekly Initial Jobless Claims. A lower Jobless number may mean we could see an improved job market tomorrow.

The Labor Department reported 305,000 workers filed for unemployment insurance. That was below the 320,000 to 325,000 expected Initial Jobless Claims. That moved the rate on the 10-year Treasury +.016% with the rate at 4.662%.

The market was also responding to Productivity at +1.7%. That was higher than the +0.8% to +1.1%. But, it was lower than last quarter’s revised +2.1%. According to some analysts the drive in bond prices was due to productivity coming in lower in quarter to quarter comparison, while ignoring expectations. That is a rare occurrence.

At 09:00cdt {14:00gmt} the bond market moved rates even higher to their current level. The market responded to a higher than anticipated ISM-Services. Analysts expected ISM-services to be 53.0 to 54.0. The institute of Supply Managers reported its non-manufacturing index at 56.0.

Two items that were ignored by the market were the Monster Jobs Survey at 186. This was higher than last month’s 177. That could be a problem tomorrow.

The DJ Business barometer dropped from the last report of -0.1% to -0.2%.

[Publisher’s note: In an attempt to clean up our blog, we will post all three outlooks on Monday only. We will post an outlook on days when one is modified.]

TOMORROW, 04 May 2007

Friday will be a busy day as the market opens with the very important monthly Employment Situation Report. The Employment Situation Report consist of four items; Average Workweek, Hourly earnings, Non-Farm Payrolls and the Unemployment Rate.

The first two; Average Workweek and Hourly Earnings are not seen as too important, and seldom surprise rates. Average Workweek is expected to equal or nearly equal the last few months 33.9 hours. Expectations range from 33.8 to 33.9. Hourly Earnings are expected to be at or higher than last month’s +0.3% at +0.3% to +0.4%

The next two items are headline items and VERY important. Payrolls are expected to grow far less than last month’s 180,000. Predictions are for a Payroll growth of 100k to 120k. We aren’t sure it will be that much lower.

Unemployment is forecast to be fairly close to last month’s 4.4%. Economist’s forecasts are unanimous at 4.5%. This has surprised markets lately coming in lower than forecast.

Steve Boxmeyer [612] 799 – 6858
steve@LendWithIntegrity.com