U.S. stock prices are receiving a boost this morning on the report that jobless claims fell to 395,000 last week, a decline of 7,000. This is the lowest level of unemployment claims since the first week of April.
The financial problems in Europe are taking on a new twist with rumors out on Wednesday that French sovereign debt was about to be downgraded, and this morning a report from Reuters says that an Asian bank has cut lines of credit to major French banks. Shares of France’s two largest banks, Societe General and BNP Paribas, have declined sharply this week, and it is clear after the financial crisis in 2008 that banks and other financial firms are more aggressive at reviewing counter party risk.
Market reaction to this morning’s data and news is a reverse of what we have experienced in the past few days. The “risk free” trade of buying U.S. Treasury bonds is unwinding as investors move into stocks. The yield on the 10 year note is now trading at 2.19%, up from 2.14% at the market close on Wednesday. Mortgage prices are lower by .25% to .375%.
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