Market Analysis

Bonds opened weaker this morning but have moved closer to break even in midday trading.  Stocks opened up, but have since moved into negative territory.

In economic news, Initial Jobless Claims for the week ended 5/29 dropped 10,000 which exceeded market expectations for a 5,000 drop but the prior week's #s were revised higher by 3,000, so the final # closely matched expecations.  Continuing Claims for the week ended 5/22 increased to 4.666 million vs expectations for a 4.60 million figure.  Factory Orders for April were up 1.2% vs expectations for a 1.7% increase.  The Institute of Supply Management Service Sector Index came in at 55.4 vs expectations of a 55.6 reading.  Anything over 50 signifies expansion.  Tomorrow's May Non Farm Payroll report could cause significant volatility tomorrow.  Analysts are expecting payroll #s to show a gain of 500,000.  Even though such a # is built into current market expectations, the shock value of such a strong # if it materializes could cause rates to move higher.  If the # comes in higher than 500,000 and/or the number comes in on target and the # of census workers added is less than 100,000 (eg higher private sector hiring than expected) we could see more severe movement.   Alternatively if the #s are much weaker, that would be expected to support steady rates and/or perhaps slightly lower closing costs for the same rate.  The other factor playing into market dynamics is the European debt crisis and the Gulf oil spill.  Developments on those fronts have the potential to move markets as well.