Stock Market Update - Friday, September 10, 2010 Cautious Outlook

Stock Market Update
Friday, September 10, 2010

Latest News Headlines:

Dow Jones.10,462.84...+47.60...(0.46%)
S&P 500........1,109.60....+5.42...(0.49%)
Nasdaq.........2,242.48....+6.28...(0.28%)



Stocks Climb Modestly As Utilities and Copper Lags

U.S. stocks climbed only modestly Friday as energy companies benefited from higher expectations for global oil demand, but utilities and copper lagged. Copper fell 1.08% percent to $3.40.

Volume has been light recently as investors seek more conviction in the market's direction. After four hours of trading, just under 1.9 billion shares had traded in New York Stock Exchange.

Among the Dow's strongest performers, Chevron rose 1.2% as crude-oil prices climbed above $76 a barrel. The energy sector led after the International Energy Agency revised up its estimate for global oil demand for 2010.

Utilities slid, stung by a 6.6% drop in PG&E, the owner of the natural-gas pipeline that exploded in a suburb of San Francisco, sparking a fire. Other utilities also weakened, including Virginia-based Dominion Resources, down 1.2% and Edison International, off 1.1%.

Shares of major banks were mixed, with some slipping as investors worried over whether international banking regulators meeting in Basel, Switzerland this weekend will impose tougher controls on banks' risk and capital levels.

"Investor sentiment is already pretty negative," said Michael Farr, president of portfolio-management firm Farr, Miller & Washington. "The talks in Europe--as they take a look in Basel and try and figure out what bank holding requirements are going to be--have people a little bit nervous."

US inventories at wholesalers rose in July by the most in two years. The report wasn't necessary a sign of confidence.

St. Louis President James Bullard said today that large countries with very low interest rates and weak pricing environments, like the U.S., Japan, Europe and potentially the U.K., cannot use their exchange rates to boost inflation away from deflationary levels. He said such an action "might not be prudent, and it might not be possible."




Market Trend is Now A Cautious Outlook Ahead
Volcker: "Something 'Seriously Wrong And Imbalanced' In World Economy."

Volcker said it would take several years for the U.S. to reach its former levels of peak production, and that the economy would have low growth rates uncharacteristic of past recoveries.

The indexes are up against heavy resistance. The markets are stretched like a rubber band and just about to snap. The volume has been diminishing with each passing day.

Whosale inventories rose Friday. In retail, when there is a rise in inventory it means we aren't selling anything. Nine states didn’t file unemployment claims data with the Labor Department this week.

Recovery Fades in UK; UK Trade Deficit Hits Record; US Trade Deficit Shrinks; Jobless Claims Cintinue to Build.

The recovery in the UK has faded, with manufacturing, housing, and services all weakening in August. In response the BOE Mulls ‘Second Wave’ of Stimulus.

Bank of England Governor Mervyn King may have to embark on a new round of bond purchases as Britain’s rebound from the worst recession since World War II fades.

Manufacturing, services and construction all faltered in August and the housing market weakened, surveys showed last week. That suggests 200 billion pounds ($309 billion) in bond purchases by the central bank since March 2009 and record-low interest rates may not be enough to keep up the economy’s momentum in the deepest budget squeeze in more than six decades.

“They are more likely to loosen policy further before they tighten it,” Alan Clarke, an economist at BNP Paribas in London, said in a telephone interview.

“The danger is acting too late and not soon enough.”

BNP economist Clarke says Bank of England officials could probably justify further bond purchases using their new forecasts, though the current strength of price pressures makes it less palatable for them as they seek to preserve their inflation-fighting credentials.

“Clearly they are concerned that loosening in an environment where the latest GDP figure is 1.2 percent and the latest inflation figure is above 3 percent would undermine their credibility,” he said. “That’s the trap they’re in.”

Quantitative easing did nothing for the US, nothing for Japan, and nothing for the UK (at least for the real economy). Yet central bankers seem committed to the strategy.

UK Trade Deficit Hits Record

Economists in the UK were disappointed to see U.K. Trade Deficit Widens to Record

The U.K.’s trade deficit widened to a record in July as purchases of chemicals and oil drove imports to the highest level in two years.

The goods-trade gap widened to 8.7 billion pounds ($13.4 billion) from 7.5 billion pounds and June, the Office for National Statistics said today in London. The median of 13 forecasts in a Bloomberg News survey was for a 7.5 billion-pound deficit. Exports fell 0.9 percent and imports rose 3.1 percent.

While the jump in imports may signal strength in domestic demand, weakening exports suggest the economy is failing to benefit from the weakness of the pound, which has fallen by a about a fifth on a trade-weighted basis since the start of 2007.

US Trade Deficit Narrows

Economists in the US were surprised to find US Trade Deficit Narrows, Unemployment Claims Didn't Drop

The trade gap shrank 14 percent, the most since February 2009, to $42.8 billion, the Commerce Department said today in Washington. The deficit was less than the lowest forecast in a Bloomberg News survey of economists.

Overseas shipments increased 1.8 percent to $153.3 billion, the highest since August 2008, while purchases from abroad declined 2.1 percent. Economists projected a deficit of $47 billion, according to the median of 73 estimates in the Bloomberg survey. Forecasts ranged from $43 billion to $52 billion.

Trade subtracted 3.37 percentage points from growth in April through June, the most since record-keeping began in 1947. The Commerce Department on Aug. 27 lowered its estimate for second-quarter growth to a 1.6 percent annual rate from the previously projected 2.4 percent. A final estimate for the quarter will be released Sept. 30.

Increased exports vs. imports will be a positive factor in GDP, so perhaps we will not see a negative 3rd quarter GDP. Nonetheless I expect surprises to be to the downside.

Read the entire article at MISH's Global Economic Trend Analysis:
http://globaleconomicanalysis.blogspot.com/


And then Obama Names Austan Goolsbee To Head Economic Council.

U.S. President Barack Obama on Friday named longtime adviser Austan Goolsbee to chair the White House Council of Economic Advisers. Goolsbee helped draft many of the president's economic policies, some of which are coming under growing criticism because of the lackluster economy.

Goolsbee is replacing economist Christina Romer, who stepped down at the beginning of the month.


Jobless Claims Drop? Are You Kidding?

Weekly unemployment claims fell this week as did the 4-week moving average. Nine states, including California, did not track claims because of Labor Day holiday.

Nine states didn’t file claims data with the Labor Department in Washington because of the Labor Day holiday, a department official told reporters as the figures were released. California and Virginia estimated their claims, and the U.S. government estimated the other seven.

Because of the holiday and more importantly because nine states made estimates, I do not think anyone can trust this drop in claims at all. Look for big revisions next week.


Volcker Predicts Long Road Ahead For US

Chairman of President Obama's Economic Recovery Advisory Board and Federal Reserve Chairman; Paul Volcker told attendees at an economic roundtable that proposed higher capital standards for banks wouldn't be enough to fix structural problems.

"When a bank goes bad it doesn't make much difference how much capital it has," Volcker said in remarks at the Changing Fortunes economic roundtable in Calgary. He added, however, that he hoped the higher capital rules being contemplated by international banking regulators in Basel, Switzerland, would improve the stability of banks.

Volcker said the problem of "too big to fail" banks still hadn't been solved, and suggested that "there should be some rules .. maintaining some separation between the central commercial banks and trading activity, proprietary activity in the financial markets." The so-called Volcker Rule in the Dodd-Frank financial overhaul law is aimed at limiting commercial banks' ability to make trades and other financial deals for their own benefit, rather than for clients.

Laws in the U.S. against combining commercial banking and investment banking and proprietary trading activity were repealed in 1999 as part of the deregulation of the financial system. Volcker predicted that a full reform of the U.S. and world financial systems was a "tremendous job" that would take between three to six years to complete.

He added that part of the healing process for the global economy would have to involve resolving the trade imbalance between the U.S. and China, where low savings by U.S. consumers and high savings by Chinese consumers led to "unsustainable" imbalances.

Volcker said it would take several years for the U.S. to reach its former levels of peak production, and that the economy would have low growth rates uncharacteristic of past recoveries. He said the U.S. financial system was "working on two-cylinders" and that the U.S. mortgage market was essentially a "subsidiary of the U.S. government."

President Obama, in his press conference Friday said that the economic recovery has been "painfully slow."



Commercial Loan Delinquencies UP In U.S.

Moody's Investors Service said delinquencies on loans in U.S. commercial mortgage-backed securities increased again in August as a big hotel loan added to that sector's woes.

Last month's increase to 8.10% from 7.89% in July comes as the pace of the ongoing rise in commercial property loan delinquencies has moderated of late. Commercial real estate has been pummeled for more than a year as occupancy rates and rents decline, putting pressure on property owners.

In August, hotels again had the highest delinquency rate, at 15.47%. The $825 million Innkeepers portfolio loan, backed by hotel properties throughout the U.S., represented more than 75% of the newly delinquent hotel loans the past month. Innkeepers USA Trust (KPA), a real-estate investment trust that owns more than 70 mid-market hotels, filed for bankruptcy in July as it labored under more than $1 billion in debt.

Multifamily delinquencies were second, increasing to 13.45% from 13.24%. Office properties had the lowest rate at 6.11%, up from 6.04% a month earlier.

By region, the West had the steepest increase, while the South had the highest rate overall, at 9.78%. The Midwest was the only region to see its delinquency rate decrease, while the East continued to have the lowest rate, at 6.28%.

Earlier Friday, Fitch Ratings reported delinquencies of loans in U.S. commercial mortgage-backed securities rose in August as a record number of problem loans were worked out but five large loans contributed to $3.1 billion in newly soured debt.



US Wholesale Inventories Rise By 1.3% In Jul
Inventories at U.S. wholesalers rose in July by the most in two years, an unexpected surge that suggested confidence in the economic recovery.

Wholesale inventories increased by 1.3% to a seasonally adjusted $404.98 billion, the Commerce Department said Friday. June inventories were revised up, to a 0.3% increase from an originally estimated 0.1% gain. Sales of distributors also rose, up 0.6% to $350.06 billion. Sales in June were revised up, falling 0.5% instead of 0.7% as originally estimated.

The surprisingly strong increase in inventories marked the biggest gain since a 1.5% jump in July 2008. The numbers Friday suggested a vote of confidence by businesses in an economic recovery that has been sputtering. A weak job market is restraining the overall recovery, and consumers are saving money they would otherwise be spending.

Wholesalers account for about 30% of all business inventories in the U.S., with manufacturers and retailers making up the rest. U.S. companies liquidated stockpiles furiously last year because of weak demand in the recession, then began refilling shelves as the economy picked up. During the first quarter, robust inventory accumulation was responsible for more than half the economy's strapping 3.7% growth.

Economists have said they believe the inventory restocking is peaking. The technology industry, for instance, saw demand mount as customers restocked their inventories earlier this year. But with supplies replenished and the recovery showing signs of weakness, demand is under pressure. Computer chip giant Intel Corp. (INTC) two weeks ago cut its target for third-quarter revenue.

Friday's report showed not only a bigger-than-expected increase in wholesale inventories, but one that was also broad-based. The data said wholesalers' inventories of durable goods - meant to last three or more years - rose 1.0% in July, after rising 0.5% the month before. Durable goods sales rose 0.5%; those sales were flat in June.

Non-durable goods inventories surged by 1.7% in July, while sales increased 0.6%. The amount of wholesale goods on hand relative to sales increased in July to 1.16, up from 1.15 in June. Year over year, inventories increased 2.5%, while sales were 12.7% higher than in July 2009.



USDA Report Seen Bearish Soy, Neutral Corn, Wheat
Friday's U.S. government supply and demand reports for grains and oil seeds were seen as slightly bearish for soybeans and neutral for corn and wheat, with few surprises, traders said.

The U.S. Department of Agriculture's report confirmed that the U.S. corn crop is smaller than earlier projections and that the soy crop looks strong by comparison. The government cut projected corn ending stocks. It also cut soybean ending stocks slightly, but not as much as analysts expected. The USDA also raised projected world wheat ending stocks, contrary to analyst expectations that the ending stocks would drop. But projected domestic ending stocks were lower.

Traders called Chicago Board of Trade corn 2 cents to 4 cents higher, in line with overnight gains. Soybeans are called 2 cents lower to 2 cents higher, with some traders seeing potential gains because of strong weekly soyoil export sales reported Friday. Wheat is called flat. Some analysts say the markets could be set up for a correction after rallying recently. But a floor trader said that the report, while mostly neutral, "is not enough to deter the bulls."

The USDA projected a corn crop of 13.160 billion bushels with a yield of 162.5 bushels per acre. That's below the average analyst estimate of 13.199 billion bushels and 163.1 bushels per acre.

The 2009 record crop totaled 13.110 billion bushels at 164.7 bushels per acre. The fast growing season could also limit yields, analysts say, as the crop has reached maturity and stopped growing before kernels have had a chance to reach their maximum size.

Even while the yield projection came in below the average analyst estimate, traders said it was not a surprise. "We're trading about a 162 (bushel per acre) yields," one trader said. "So it's not bullish."

The USDA estimated the 2010-11 carryout at 1.116 billion bushels, down slightly from the average analyst estimate of 1.125 billion and down from the USDA's August estimate of 1.312 billion. "Would I be surprised to see some profit-taking? No," said Jim Gerlach, president of A/C Trading. Will you see corn very well supported on dips? Yes."

The USDA projected a record soybean crop of 3.483 billion bushels with a yield of 44.7 billion bushels per acre. That's above the average analyst estimate of 3.406 billion bushels and 43.8 bushels per acre. It is also up from the USDA's August estimates of 3.433 billion bushels and 44.0 bushels per acre. "The USDA's increase in output and yield for soybeans was a touch negative, but not out of line with expectations," said Jack Scoville, vice president of Price Futures Group.

The USDA estimated the 2010-11 carryout at 350 million bushels, up from the average analyst estimate of 304 million but down slightly from the USDA's August estimate of 360 million. The USDA also trimmed its 2009-10 ending stocks estimate to 150 million, down from an August estimate of 160 million.

The USDA projected 2010-11 ending stocks at 902 million bushels, down from analyst forecasts of 914 million bushels and below the government's August estimate of 952 million. The USDA also increased its 2010-11 world wheat ending stocks estimate, to 177.8 million tons. Analysts had expected a reduction of 1.5% to 3.3%. Traders said the world estimate was unlikely to sway market sentiment, and that overall the report was neutral for wheat.

Scoville said "lingering concerns about world supplies will provide some support to the market." But Kayla Hoffman, analyst with SunPrairie Grain in North Dakota, said "the idea that global supplies are not threatened could put a cap on gains from increased U.S. exports."

US Small Business Program Helping TARP Banks

A program to facilitate lending to small businesses has provided millions of dollars in subsidies to a small group of banks even though demand for loans remains uncertain.

In August, the U.S. Treasury distributed $143.2 million through the Community Development Capital Initiative, or CDCI, to support 11 banks in hard-hit communities. Millions more could be distributed to similar banks in coming weeks.

The Treasury's program is well-intentioned. Increased bank lending to small businesses could rekindle job growth, which could generate more consumer demand as people become confident about their jobs. The Treasury hopes that will create a virtuous cycle that prompts a self-sustaining recovery.

The trouble is banks aren't lending out of concern that businesses might not be able to repay. Consumers aren't borrowing; they're rebuilding depleted savings. In addition, collateral, like real estate and industrial machinery, continues to fall in value.

Against that backdrop, the Treasury is moving ahead with the initiative, which will roll in some of the investments it made under the Troubled Asset Relief Program. The Treasury is doing this by converting preferred shares issued under TARP to preferred shares under the CDCI.

The result: the government has so far subsidized 11 banks by between 33 cents and 57 cents on every dollar it invested, says Linus Wilson, professor of finance at the University of Louisiana. Supporting community lending is a valid goal, but he says these rollovers effectively turn the TARP program, which was designed to stabilize a rickety financial system, into a "slush fund" for weak banks.

A Treasury spokesman declined to discuss details of the program or how many banks might benefit.

Converting the TARP investments has two key benefits for the banks. It reduces the dividend rate the banks pay on the capital to 2% from 5%. It also extends the period of low interest to eight years from five.

New York-based Carver Bancorp Inc. (CARV) disclosed that conversion of its $19 million TARP investment to a CDCI investment would save the bank $569,000 in interest annually. M&F Bancorp (MFBP) of Durham, N.C. said interest expenses on its $11.7 million TARP investment would fall by $300,000 annually.

Canadian Market:

Noon EDT Toronto Indexes

S&P/TSX Composite 12057.55 up 24.02 or 0.2%
S&P/TSX 60 Index 701.43 up 0.63 or 0.1%
Financials 175.77 up 0.08 or 0.0%
Materials 374.46 up 2.24 or 0.6%
Energy 276.65 up 0.71 or 0.3%
Industrials 103.10 off 0.15 or 0.1%
IT 26.84 off 0.17 or 0.6%

Volume Friday Thursday
11-12 55.6M 70.7M
9:30-12 177.4M 199.8M



Canada Aug Jobs Up 35,800, Jobless Rate Up To 8.1%
The Canadian economy created more jobs than expected in August following declines the previous month, with employers in the service sector hiring more full-time workers while shedding part-time jobs.

The economy added 35,800 net jobs in August, while the unemployment rate inched up by 0.1 percentage points to 8.1% as more workers entered the labor force, Statistics Canada said Friday.

A loss of private-sector jobs and out-sized gains in the public sector driven by a reversal of losses in the education sector in July.

The Canadian dollar hit a three-week high after the data were released, with the U.S. dollar reaching C$1.0288 from C$1.0325 just before the report. The Canadian unit subsequently surrendered most of its gains, with the U.S. dollar at C$1.0338 in mid-morning trading.



South American Markets:

Mexico:
Mexican stocks were flat in early trading Friday, with support from gains in U.S. equities offset by losses in bellwether America Movil (AMX, AMX.MX) shares. The benchmark IPC index was up 0.03%, or 11 points, to 32531 points around 10:45 a.m. EDT. Volume was 14.6 million shares worth 338.5 million pesos ($26.1 million).

Brazil:
Brazil Stocks Steady Amid Lower Sao Paulo Inflation Data

Brazil's stock market held steady Friday morning as data showed that inflation slowed in the country's largest city, and global markets remained muted. Concern about Deutsche Bank weighed on sentiment in Europe, while investors awaited U.S. President Barack Obama's news conference for any comments on the economy.

The Ibovespa stocks index was fractionally higher from Thursday's close, at 66,596 points.

Consumer inflation in Brazil's largest city, Sao Paulo, slowed in the four weeks ended Sept. 7, lending more weight to expectations that the central bank will hold its key interest rate at 10.75%, with prices under control.

Chile:

Chile Peso Closes Flat, Unable To Break Through Key Resistance

Chile's peso ended virtually flat against the dollar in thin trading Friday, after nearing key resistance and bouncing back. The peso ended at CLP496.30 to the dollar, compared with Thursday's close of CLP496.00, while trading in a narrow range of CLP495.10 to CLP497.60.

Chile is the world's premier copper producer, accounting for more than a third of global supply, the peso often takes cues from the metal's international prices. Spot copper prices have increased from an average of $2.95 a pound on the London Metal Exchange in June, to an average thus far in September of $3.44 a pound, according to Chile's state copper commission.


Chile Central Bank Pres Says Rates At 5%-6% Are Neutral

Neutral interest rates for the Chilean economy are currently at around 5% to 6%, central bank president Jose De Gregorio said Friday. During the first seven months of 2009, the central bank slashed the key rate a total of 7.75 percentage points, bringing it down to an unprecedented 0.5% from 8.25% in December 2008.

In June of this year, the central bank hiked the benchmark rate, known locally as the TPM, for the first time in almost two years. The TPM is currently at 2.0% but analysts anticipate the bank will likely hike it to 2.5% at its monthly monetary policy meeting scheduled for next week.

"Any way you look at it, 2% is fairly off from being neutral," De Gregorio told reporters.

for the first eight months of the year, Chile's consumer price index gained 2.3%, although the latest reading showed that CPI retreated an unexpected 0.1% in August from the previous month. Despite the latest surprising August drop in CPI, De Gregorio said that the country is "now entering a period of stable inflation."

As Chile quickly recovers from last year's recession and February's earthquake, posting 6.5% growth on the year in the second quarter, the monetary authority will raise rates in anticipation of improving productivity and continued growth.

The monetary authority has an inflation target of 3%, plus or minus one percentage point, in its 24-month policy horizon.


Venezuela:
Venezuela's crude output in August was 2.23 million barrels a day, unchanged from the previous two months, the International Energy Agency said Friday.

Oil production in Venezuela is a matter of frequent debate. The government claims output is about 2.9 million barrels of crude a day, higher than figures reported by the IEA and others. On Thursday, the Organization of Petroleum Exporting Countries said Venezuela's output last month was at 2.31 million barrels a day.



European Markets:
European stock markets ended the week on a subdued note Friday, with Deutsche Bank falling sharply on a report that the firm is planning to sell new shares and as Nokia gained after it appointed a new chief executive.

The pan-European Stoxx Europe 600 index slipped 0.2% to 264.70, paring gains for the week to 1.7%. The U.K. FTSE 100 index closed up 0.1% at 5,501.64 and the French CAC 40 index gained 0.1% to 3,725.82, while the German DAX 30 index lost 0.1% to 6,214.77.

The European Commission is planning to come forward with a proposal for a pan-European tax regime for corporations next year.

Germany:
Shares in Germany's Deutsche Bank sink following reports that it may issue up to €9 billion in new shares to shore up capital and buy a bigger chunk of Deutsche Postbank.

Deutsche Bank has always been clear that it might raise equity alongside a possible deal to buy out minorities in Postbank. But the timing and size of the contemplated deal caught the market off guard, reports Simon Nixon.



Greece:

Greek Companies to Pay Record High Interest Rates
Senior Greek officials will sweep through Europe's financial centers next week to try and convince investors that they shouldn't have to pay ruinous interest rates on their sovereign debt, writes Costas Paris and Nick Skrekas.

Greece Tightens Security Ahead Of Protest Demonstrations
Government officials drafted in an extra 4,000 officers to the northern city of Thessaloniki ahead of protests against the socialist government's austerity program, police said Friday.

The reinforcements are to help control protesters Saturday afternoon's march organized by trade unions, which takes place the same day Prime Minister George Papandreou addresses an international fair in the city.

Ireland:
Dublin Stocks:ISEQ Ends Flat At 2,781; Bank Of Ireland -3.9%

Asian Pacific Markets:

China:

China may soon announce additional tightening measures.
China, the world's most populous nation, is facing a huge unemployment problem as only 780 million of its more than one billion laborers are employed, the government says.

Data from China showed its August imports were up 35.2% year-on-year to $119.27 billion, better than the 25% increase that was expected by economists. The larger-than-expected increase in imports was seen as a sign that China's government-engineered slowdown in economic growth was less severe than some had projected.

Investors are still concerned about how China's efforts to slow its growth would impact demand for metals and other commodities, as the country's tightening measures are likely not over. There is speculation that China will soon roll out additional moves to put the brakes on its growth.

Japan:
Japan unveils a new Y915 billion stimulus package and turns up the heat on the central bank to work harder to stop deflation. Many economists say the package is too small.



World Markets Snapshot:

Shanghai	2,663.21	+6.86 (0.26%)
Nikkei 225	9,239.17	+140.78 (1.55%)
Hang Seng Index	21,257.39	+90.12 (0.43%)
TSEC	7,890.11	+54.57 (0.70%)
FTSE 100	5,497.34	+3.18 (0.06%)
DJ EURO STOXX 50	2,778.42	+25.53 (0.93%)
CAC 40	3,722.20	+0.05 (0.00%)
S&P TSX	12,033.53	0.00 (0.00%)
S&P/ASX 200	4,560.30	-21.90 (-0.48%)
BSE Sensex	18,799.66	+132.95 (0.71%)

Currencies

EUR/USD	1.2725	+0.0027 (0.21%)
USD/JPY	83.9600	+0.0600 (0.07%)
GBP/USD	1.5453	+0.0026 (0.17%)
CAD/USD	0.9701	+0.0022 (0.22%)
USD/HKD	7.7676	-0.0016 (-0.02%)
USD/CNY	6.7692	-0.0128 (-0.19%)
AUD/USD	0.9262	+0.0020 (0.22%)

Commodities
Crude Oil	75.73	+ 1.99%
Natural Gas	3.87	+ 2.68%
Gasoline	1.96	+ 1.50%
Heating Oil	2.08	+ 0.71%
Gold	1244.35	+ 0.01%
Silver	19.88	+ 0.66%
Copper	3.42	- 0.44%
Quotes delayed 15 min.		» Add to your site

Thursday Market Summary:

Stocks:
Investors tempered their enthusiasm over the latest round of economic data, paring morning gains to advance modestly in light trading. Indexes pulled back from earlier gains that had pushed the Dow back into positive territory for the year and sent the S&P 500 to a one-month high. Traders blamed some of the giveback on another session of light volume, which tends to skew moves on the way up and down.

Treasurys:
Treasurys dropped for a second straight session as the latest U.S. jobs and trade data eased worries about the health of the U.S. economy, sapping demand for a $13 billion 30-year bond sale. The deluge of new corporate bond debt sales this week, which provide higher yields, also lured many investors away from the Treasury market.

Forex:
Currencies closely tied to the pace of global growth, such as the Australian and Canadian dollars, rose after better-than-expected U.S. data painted a brighter picture of the economic recovery. The U.S. data fanned a spark of optimism that had been ignited on the back of an unexpected improvement in Australian unemployment figures, which sent the Australian dollar to a four-month high against the greenback.

Friday's US Economic Calendar:

8:30 a.m.
World Agricultural Supply & Demand Estimates (WASDE)

10:00 a.m.
Jul Monthly Wholesale Trade Inventories (expected +0.4%)

11:00 a.m.
U.S. President - Obama speaks on the economy on U.S. national television