Treasuries and mortgages opened slightly weaker this morning with the 7 yr note auction looming at 1:00 this afternoon. At 8:30 the 10 yr note -10/32 at 3.70%, mortgage prices -4/32, the trade in the stock index futures had the DJIA +85. At 9:00, the 10 yr -8/32, mtgs -2/32 and the DJIA index +80.

Weekly jobless claims at 8:30 were up 25K to 584K and about in line with forecasts, but still not free from the summer adjustments affected by the earlier than normal annual layoffs in the auto industry. Analysts continue to debate the accuracy of the claims. Nevertheless it is better; continuing claims, more important than the weekly numbers fell to 6.197 mil from 6.251 mil last week, and well down from 6.84 mil reported three weeks ago. Declining continuing claims is a very positive thing if it means unemployed are going back to work; however, a very negative event if continuing claims decline because the unemployed are running out of unemployment benefits. The reaction, regardless of the suspicions surrounding the data's accuracy these days, sent the stock indexes up and put a slight amount of pressure on the interest rate markets.

Nothing left on the calendar today but the $28B 7 yr note auction at 1:00 this afternoon; the two previous auctions (2 yr and 5 yr) were not well received and the 7 yr is kind of an odd ball for the yield curve. Most traders are not expecting it will do well so that may already be baked in the cake. The rest of the session today will focus on the stock market. Most see it as an overbought condition and expect a correction, but not happening. Markets generally don't do what is widely expected----why rallies are referred to as "climbing a wall of worry". The equity market is on a roll that appears to have more push than what we think.