Weekly unemployment claims at 8:30 were essentially unchanged at 387K -2K from last week. Last week's claims were revised from 386K to 389K, the fourth week in a row claims have been revised higher from what was originally reported. Continuing clams were unchanged at 3.299 mil. The 4 week average increased from 382.750 last week to 386,250. There was little market reaction to the data but it is one more data point that confirms the economy is slowing. Yesterday's FOMC statement, after continual comments that the economy was growing, the Fed admitted its outlook had been too optimistic; being dragged lower on Europe's inability to find any long term solutions to its debt and bank problems. The claims report substantiates employers are not willing to hire. Prior to the release the 10 yr traded -1/32 in prices, after the report it was +1/32 with no change in the yield; mortgage prices generally unchanged both before and after the report. At 9:30 and prior to key data at 10:00, the DJIA opened +23, NASDAQ -2; 10 yr note 1.64% -1 bp +4/32 and mortgage price on 30 yr fixed +3/32 (.09 bp). 10:00 data; the June Philadelphia Fed business index saw a huge decline, the index at -16.6 after the May index was revised lower to -5.8; new orders -18.8 frm -1.2, prices pd -2.8 frm +5.0, employment at 1.8 frm -1.3. Any reading under zero is considered contraction; the report is rather shocking but is in line with comments yesterday from the FOMC that the economy is weakening on Europe's fumbling. May leading economic indicators at 10:00 increased 0.3% against forecasts of unchanged. May existing home sales were expected to have declined 1.3%, as reported sales were down 1.5% to 4.55 mil; the median sales price at $182,600, yr/yr up 7.9%. According to sales there is a 6.6 month supply of unsold homes. Yesterday's FOMC policy statement on one hand was disappointing to the markets that the Fed didn't announce another QE 3, but extended Operation Twist through the end of the year. The Fed will continue to buy longer dated treasuries (6 yr to 30 yr terms) while selling notes under 6 yr terms for a total of $267B. The Fed wants to keep long term rates from increasing but resisted a wider easing move even though the Fed is now saying the economy is not expanding as the Fed thought it would in recent outlooks. On the other hand, that the Fed is increasingly concerned the economy is slowing is motivating some in the markets that later this year the Fed will be "forced" into another stronger easing move. That idea seems to be supporting the equity markets at the moment. Euro-area services and manufacturing output contracted for a fifth month in June, suggesting the economy may fail to grow in the current quarter. A composite index based on a survey of purchasing managers in both industries in the 17-nation euro area held at 46, the same reading as in May, London-based Markit Economics said today. In China, a purchasing managers' index from HSBC Holdings Plc and Markit Economics gave a preliminary reading of 48.1 for June, indicating that manufacturing in the world's second-largest economy will shrink for an eighth month. Readings above 50 mean the industry expanded. Both the 10 yr note and the 30 yr 3.5 FNMA coupon continue to hold their technical bullish bias. The 10 has strong resistance at 1.56% with strong support at 1.70%. The July 30 yr FNMA has successfully held at its 20 day moving average as has the 10 yr note on any selling. This morning's data will support treasuries and mortgages as the data continues to weaken.