Treasuries and stocks overlooked a better than expected report on weekly jobless claims and instead followed their respective paths of least resistance. For Treasuries that meant extending recent gains (its third in a row), while the Dow stretched its losing streak to five. Although the print of a 13,000 drop in initial claims and a decline in continuing claims provided some early support for stocks and weighed slightly on bonds, the markets soon reversed and position squaring then dominated through the rest of the session.
Shorts covered in Treasuries ahead of Friday's data and as Wall Street's malaise intensified. There was also some unwinding of hedges associated with the recent spat of corporate offerings. Meanwhile buyers were scarce in equityland which contributed to the better than 1% declines the major stock indexes.
Indeed with the fast approaching Dec. 8 Iraq deadline to declare its weapons of mass destruction, and more reports of terrorists incidents around the world, there was little incentive to go long stocks. The moves in the markets may have been exaggerated, however, by a heavy snowfall on the East Coast which thinned trading rooms through the day.