Dedham Condominiums

The terrorist bombings in London on Thursday morning created a surge of safe-haven buying as investors sought risk-free U.S. Treasury securities. Prices of Treasuries soared, sending yields, which move in the opposite direction of prices, plummeting. Stocks also took a dive early, but the financial markets recovered their balance as the session wore on. Treasuries gave back a good percentage of their gains, but yields closed lower than they did on Wednesday. One factor keeping a lid on buying was anxiety over Friday's release of the June Employment Report. The 'whisper numbers' are much higher than the analysts' forecasts for the creation of 185,000 new jobs. Today, however, yields were lower and helped to keep mortgage rates, which are based on Treasury yields, steady.

The only economic news for Thursday came in the form of first-time unemployment claims for the week ended July 1. Although claims rose 7,000 to 319,000, some increases were chalked up to temporary layoffs of autoworkers while factories are retooled and summer school closings, which eliminate the need for service jobs. The more closely watched four-week average fell to 320,000 - its lowest level since March 5. Continued claims, people collecting benefits for more than one week, also fell to 2.58 million.

Lower Oil Prices and Upbeat Corporate News Turn Stocks Around

Dow Jones Industrial futures plunged dramatically when news of the attacks on the London transportation system that killed 37 and injured hundreds was released. The report also impacted Treasuries and oil, which first spiked, then plunged and recovered again. Oil closed down 1 percent from Wednesday's record level, but it had been down 3.5 percent before climbing back to end at $60.73 a barrel. This took some pressure off stocks, which were also aided by bullish reports on June sales from a number of retail chains and positive forecasts for new home orders from some of the nation's top homebuilders.

The Dow Jones closed in positive territory, with half its components posting gains and the other half ending in negative territory. Caterpillar and IBM added more than 2-percent each, while Boeing, McDonald's and 3M rose more than 1 percent. Of the 15 stocks that closed down, GM, Merck, SBC and Disney lost in excess of 1-percent each, while other declines were much smaller.

The Nasdaq composite also rebounded and closed with the biggest gain of the three major indexes. The tech bellwethers were weighted on the positive side, led by IBM, which added 2.1 percent and Yahoo!, which sported a 1.5 percent increase. Of the four bellwethers closing down, Sun Microsystems suffered the biggest loss, falling 2.9 percent. Other losses were modest.

At closing:

The Dow 30 Industrial Index rose 31.61 points or 0.31 percent at 10,302.29; the Nasdaq Composite index was up 7.01 points or 0.34 percent at 2,075.66, and the benchmark Standard & Poor's 500 Index gained 2.93 points or 0.25 percent to 1,197.87.

The 30-year Treasury bond rose 12/32 in price with the yield slipping to 4.30 percent from 4.32 percent at Wednesday's closing.

The 10-year Treasury note was up 5/32 in price with the yield dipping to 4.05 percent from 4.07 percent at Wednesday's close.

The 5-year Treasury note was up 4/32 in price with the yield down to 3.83 percent versus 3.86 percent at Wednesday's closing

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

The 30-year Conventional Fixed-Rate Mortgage was at 5.421 percent from 5.434 percent at Wednesday's close.

The 15-year Conventional Fixed-Rate Mortgage was at 5.018 percent from 5.019 percent at Wednesday's close.

Coming Up

The Employment Report for June will be out on Friday and as usual, it will shape the trading day. Analysts are expecting 185,000 jobs to be added to non-farm payrolls, which is significantly more than the 78,000 created in May. The buzz on the street, however, is for even more jobs based on strong reports, such as those from the ISM that showed increases in employment. Wholesale Inventories, expected to have increased 0.6 percent in May, and Consumer Credit, which was forecast to jump $4.2 billion, will have little impact on the markets. A big increase in jobs will support the equity markets and weigh on Treasuries. A strong labor market would likely keep the Fed in rate-hiking mode, sending Treasuries prices down and yields up. Of course, the opposite could also hold true. Until the report is released mortgage rates should hold steady due to the slight lowering of yields on Thursday.

Carolyn Siegel

carolyn@interest.com

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