U.S. Treasury prices closed higher yesterday, despite stronger-than-expected monthly growth in the services sector, on weak January jobs data. The 10-year Treasury bond closed up 4/32 at 98-18/32 while its yield fell to 4.809%, a drop from 4.829% on Friday but still 40 basis points above a December low. The 30-year bond advanced 3/32 to 93-20/32 with a yield of 4.914% and the 2-year note gained 1/32 to 99-29/32 with a 4.921% yield. The Institute for Supply Management reported that the U.S. services sector grew slightly more quickly in January than it did in December. The non-manufacturing index rose to 59.0% from 56.7% in December, ahead of economists' forecasts of 57.0%. Bond dealers looked past that strong result, however, and focused on the report's negative indicators: new orders were flat and the employment index dropped. Weakness in the labor market implies that the Fed will not effect an interest rate hike in the near term. In other news yesterday, President Bush sent Congress a $2.9 trillion budget plan for fiscal 2008 that is intended to balance the government's books by 2012.
Sources: MarketWatch, Reuters
Commentary: U.S. Payrolls, Wages Increased Less Than Expected in January, NFP Data Reflect a Slowing Economy, Market Performance Following Monthly Jobs Report
Stocks/ETFs to watch: S&P 500 Index (NYSEARCA:SPY), NASDAQ 100 Trust Shares ETF (QQQQ), Diamonds Trust Series 1 ETF (NYSEARCA:DIA), iShares Russell 2000 Index ETF (NYSEARCA:IWM), iShares Lehman 1-3 Year Treasury Bond ETF (NYSEARCA:SHY), iShares Lehman 7-10 Yr Treasury Bond ETF (NYSEARCA:IEF), iShares Lehman 20+ Year Treasury Bond ETF (NYSEARCA:TLT)
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