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Strategies & Market Trends : Anthony @ Equity Investigations, Dear Anthony, -- Ignore unavailable to you. Want to Upgrade?

To: StockDung who wrote (80949)	10/10/2002 5:46:00 PM
From: KZAP	Read Replies (2) \| Respond to of 122087

Welcome, KZAP Reuters Market News Investors, chasing Wall St rally, dump Treasuries Thursday October 10, 5:25 pm ET By Ross Finley (Updates with closing prices) NEW YORK, Oct 10 (Reuters) - Treasuries slumped on Thursday as investors dumped fixed-income holdings and chased a rally in Wall Street stocks driven by signs of life in technology and a relief bounce from five-year lows. ADVERTISEMENT "It's all stocks," said Marcello Frustaci, a bond trader at Mizuho Securities (USA) in Hoboken, New Jersey, explaining the sudden plunge in safe-haven Treasuries prices as bond market investors rushed for the exits. A report that said first-time claims for unemployment benefits plunged in the latest week added pressure to the selling although most analysts chalked up the drop to seasonal factors and were not cheering a jobs recovery just yet. Two-year Treasury note (US2YT=RR) yields spiked up to 1.72 percent after earlier setting a new record low around 1.63 percent. But they still remained below the 1.75 percent fed funds rate, signaling the market is still betting the Federal Reserve will cut interest rates by year's end. The benchmark 10-year (US10YT=RR) note yield rose to 3.66 percent by the 5 p.m. (2100 GMT) close but was only 10 basis points above its 44-year low of 3.56 percent struck last week. On Wall Street, the tech-heavy Nasdaq composite index (NasdaqSC:^IXIC - News) soared 4.4 percent, in part on strong earnings report from Internet media group Yahoo Inc. (NasdaqNM:YHOO - News). The Dow Jones industrial average (CBOT:^DJI - News) rallied nearly 3.5 percent from a five-year low the day before. That rally had bond traders talking about a bottom. "I believe it intuitively myself that the stock market is going through a bottoming process -- that's why you see so much volatility," said Frustaci. Indeed, Morgan Stanley's chief technical analyst made a bold call on Thursday, saying the stock market has reached a trough for the year after the blue-chip Dow Jones industrials (CBOT:^DJI - News) fell below a five-year low. But traders said it was still a dangerous game to place bets against the mighty Treasury market, which has soared nearly all year and has steamrolled down anybody willing to bet against its path. "Will you short the market right now?" Frustaci asked. "No." Indeed, Morgan Stanley's chief economist, Stephen Roach -- who was the first Wall Street dealer economist to correctly predict last year's recession -- is practically a lone wolf on Wall Street anticipating a second one. That will help bonds if it ever materializes. JOBLESS CLAIMS DOWN BUT DISTORTIONS IN DATA Treasuries were briefly troubled by U.S. jobs data which on the face of it were stronger than expected, but the market quickly steadied when it became clear that seasonal adjustment problems may have distorted the numbers. The government said unemployment claims fell 40,000 to 384,000 in the latest week from 424,000 the week before. Analysts had expected only a dip to 411,000. Unusually warm weather and distortions following Sept. 11 last year seemed to have made the figures seem stronger than they were, analysts said. The Labor Department also admitted there were distortions in the numbers. "We believe claims will rebound (higher) in coming weeks," said Gerald Cohen, senior economist at Merrill Lynch. "That said, the claims data does point to a jobs picture that is not worsening." Data on import prices showed a much bigger than expected rise of 0.7 percent in September following a 0.3 percent gain in August. But after a 6.0 percent spike in petroleum prices was stripped out, prices were up a modest 0.2 percent. Treasuries took some comfort early from generally subdued September chain store sales data, which were particularly weak as sales a year earlier had been depressed by the Sept. 11 attacks on the U.S. The figures reinforced expectations for a weak retail sales report for September, due on Friday. Average forecasts are for a fall of 0.9 percent, largely due to a big drop in auto sales, but the latest chain store figures suggest the non-auto sector was also sluggish. But market participants said Treasuries may have limited room to run on Friday's data given that a dip in consumer sentiment and a slowdown in September retail sales are already mostly priced into expectations. "I think a lot of it has been priced in but there's still room, the belly of the curve still has room to do better," said Mizuho's Frustaci. (Additional reporting by Kyle Peterson in Chicago)