Treasuries spent the day in negative territory as traders there took some profits made in recent sessions.

In late trading, the 10-Year Treasury Note was down by 1-20/32, raising its yield by 19 basis points to 3.20%; the Dow was up by 494.13 points to 8,046.42; and the Nasdaq was up by 68.23 points to 1,384.35.

Oil futures were little changed today. The price for a barrel of light, sweet crude for January delivery rose by $0.51 on the New York Mercantile Exchange to settle at $49.93. This was $0.31 higher than the closing price of yesterday's now-expired December contract. Today's price was still the second lowest for a front-month contract in three-and-a-half years.

By the end of stock trading, the Dow had gained 6.54%; the S&P 500, 6.32%; and the Nasdaq, 5.18%. Despite today's strong gains, the indices took heavy losses for the week. The Dow lost 450.89 points or 5.31%. The other major indices did even worse. The S&P 500 fell by 8.39% for the week and the Nasdaq fell by 8.74%.

This was the third straight week of heavy losses for stocks with the Dow losing 13.71% over that time, the S&P 500 losing 17.42%, and the Nasdaq losing 19.56%.

Despite today's losses in the bond market, the yield of the benchmark 10-Year Note fell this week by 53 basis points. For the first three weeks of the month, the yield has fallen by 76 basis points.

Next week's trading will be front-weighted as the Thanksgiving Holiday will have the markets closed on Thursday and many traders will stay on the sidelines Friday as they attempt to stretch the weekend to four days. Inasmuch as Thanksgiving is a domestic holiday, foreign markets will be open then and defensive positioning against event risk may favor Treasuries.

In addition, portfolio managers will be adjusting their holdings during the week according to such characteristics as risk, yield, and return horizon. This rebalancing process also often entails the purchase of Treasuries. But purchases already made this month may prevent much further progress. Supply pressure may also weigh on the bond market as the Treasury will be auctioning new issues of 2-Year and 5-Year Notes.

On the economic release calendar, Monday brings the report on existing home sales for last month. The report for September was more bullish than expected. The National Association of Realtors said that the seasonally adjusted, annualized rate of existing home sales rose that month by 5.5% 5.18 million from August's rate of 4.91 million. The increase was the largest since February of 2006 and the pace was the highest since August of last year.

The pickup in sales caused inventories of homes on the market to decline. The seasonally adjusted, annualized level fell by 1.6% to 4.266 million in September. At sales pace prevailing at the time, this represented 9.9 months of sales, the lowest turnover time since February.

Though more home buying activity is a plus for the economy, it also reflects the weakened state of the housing market since the pickup in buying interest was prompted by a sharp decline in home prices. The average price fell by $10,700 in September or 4.4% to its lowest level since April of 2004.

The median price was down by $11,500 or 5.7% to its lowest level since February of 2005. On a year-over-year basis, the average home price was down by $22,600 or 8.8% and the median price was down by $18,900 or 9.0%.

The declining prices are due to lack of demand and from the increase in inventories earlier this year. The lower home values decrease personal wealth, further dispiriting consumers who are also watching their stock investments plummet. Falling prices also have a negative aspect on sales since some buyers may be reluctant to take on a large debt for an asset they feel is still declining in value.

For October, the sales pace is expected to have declined by 2.5% to 5.01 million. This would still be in line with the average pace over the last year.

On Monday afternoon, the Treasury will be conducting its monthly auction of 2-Year Notes. Last month's was well received. Bids exceeded the $34 billion offer amount by 2.49 to 1, the highest bid-to-cover ratio in the last four offerings and above the 2.35 average for the twelve auctions preceding October's.

Noncompetitive bids, a gauge of individual investor demand, were relatively soft, however. They totaled $539 million, the lowest amount in the last eight auctions. The twelve month average was $637 million.

But foreign demand for the issue was strong. Indirect competitive bids, which include those from foreign central banks, garnered 41.3% of the issue, the highest award portion in the last twenty auctions. The twelve-month average was only 25.8%.

On Tuesday, the Commerce Department will release its first revision to last month's initial estimate of gross domestic product (GDP) for the third quarter. Last month's advance report said that GDP declined at a 0.3% annualized rate in the July through September period. This was the first decline since the fourth quarter of last year and the largest decline since the third quarter of 2001. GDP grew by 2.8% in the second quarter.

GDP is the market value of all final goods and services produced by labor or property in the country in a year?s time. Quarterly data is adjusted and annualized and changes from quarter to quarter indicate the strength and direction of the economy. As more data becomes available, the calculations are revised. A final report will be released next month.

The last report indicated that consumer spending declined by 3.1% in the third quarter, the steepest contraction since the second quarter of 1980. The category represented a 2.25% subtraction from the GDP calculation.

A negative inflation indicator in the report was a 4.2% increase in the price index. This was the largest rise since the first quarter of 1991. The price index for core personal consumption expenditures (consumer spending minus food and energy) rose by 2.8% in the third quarter, the biggest increase since the second quarter of 2006.

But not all of the news was bad. Most analysts were actually anticipating a decline in GDP of between 0.5% and 1.0%. Net exports were a strong point, adding 1.13% to the GDP calculation. A somewhat more equivocally positive contribution came from a 5.8% expansion in government spending. This was the largest increase since the fourth quarter of 2001 and it represented a 1.15% addition to the GDP calculation.

Next week's preliminary report is expected to be a little more bearish than the advance report. Predictions are that it will say the economy slipped last quarter by 0.5% or 0.6%.

A little later on Tuesday morning, the independent research firm, the Conference Board, will release its Consumer Confidence Index figures for November. Last month, the overall confidence index was 38.0, the lowest reading in the history of the data series going back 41 years. There was little consolation in the fact that September's reading was revised up to 61.4 from 59.8. The news release said that the index of current conditions came in at 41.9, down from September's 61.1 (originally reported as 58.8) and the expectations index came in at 35.5, down from 61.5 (originally 60.5).

Although the index readings were much weaker than analysts predicted, the credit crunch, falling stocks, news of failed financial institutions, and announcements of government bailout measures have understandably raised consumer anxieties. November's confidence index is expected to remain pessimistic but analysts feel that it will come in a little higher at between 39.0 and 41.0.

On Tuesday afternoon the Treasury will be auctioning off this month's issue of 5-Year Notes. Last month's auction results were not bad. The bid-to-cover ratio for the $24 billion issue was 2.28, the highest in the last three auctions and above the average of 2.18 for the twelve auctions preceding last month's. Individual investor demand was soft, however. Noncompetitive bids totaled just $82 million, the lowest amount in the last six auctions and down from the twelve-auction average of $92 million.

Foreign demand was decent but not spectacular. Indirect competitive bids received 28.1% of the issue, up from the award portion in September's auction of 26.6% and higher than the twelve-auction average of 25.2%.

Wednesday will be a busy news and trading day. The report on jobless claims will highlight the employment situation once again. In yesterday's report, the Labor Department said that the seasonally adjusted level of initial claims for state unemployment benefits rose last week by 27,000 to 542,000. The jump was somewhat of a surprise following an increase of 31,000 the week before (originally 32,000), though last week's figures may have been distorted by the Veteran's Day holiday.

Nevertheless, the latest claims level was the highest since July of 1992. The four-week moving average, which smoothes out some short-term volatility, rose by 15,750 last week to 506,500.

Any initial claims reading over 400,000 is considered an indication that layoffs are outpacing hiring and the recent figures suggest that job losses are accelerating. For the forty-six weeks of the year to date, the average weekly reading has been 403,630. For the same period last year, the average was 318,435.

The report said that the level of continuing claims rose by 109,000 to 4.012 million in the week ending November 8 (continuing claims must be at least a week old). This was the highest level since December of 1982. The four-week average rose by 71,250 to 3.867 million. For the first forty-five weeks of the year, the average continuing claims reading has been 3,186,400. For the same period last year, the average was 2,533,222.

Following the 58,000 rise in the initial claims level in the last two weeks, a decline in this week's claims figure would not be too surprising, but it would not change any opinions regarding the deteriorating situation in the labor market.

The report on durable goods orders for last month comes out on Thursday morning. Durable goods are defined as items meant to last three years or more. They are usually labor-intensive to produce, expensive, and therefore often financed. Because of this, the trend in orders provides some insight regarding upcoming production activity and the effect interest rates may be having on the process.

The report for September said that the seasonally adjusted level of orders rose by 0.8% and this was subsequently revised up to 0.9% in the last factory orders report. The bounce followed a 5.5% decline in August, the largest contraction since October of 2006.

A major contributor to the rise in September was a strong jump in the volatile category of transportation. Excluding the category, the order level fell by 1.0% after a dive in August of 4.2% (the largest since January of 2002). A rise in defense orders also helped the overall increase. But orders for defense are not governed by standard market forces. Excluding defense, orders were down by 0.5% following a 6.0% drop in August.

Another closely watched category is that of non-defense capital goods minus aircraft. This is seen as a gauge of core business spending. The order level fell there by 1.5% in September following a 2.3% decline in August.

The overall order level is expected to have fallen in October. The forecast range is between -1.3% and -2.5%.

Also out early on Thursday morning is the report on personal income and spending for last month. In the last report, the Labor Department said that personal income, the fuel for consumer spending, rose in September by 0.2%. Though this was slightly stronger than the 0.1% increase that analysts had predicted, August's originally reported increase of 0.5% was revised to 0.4% and July's previously reported decline of 0.6% was revised to a drop of 0.8%.

The data series was jolted last May by the government rebate checks distributed under the economic stimulus package. This caused average income to jump by 1.9%, the largest increase since September of 2005 when the data was skewed by the impact of Hurricanes Katrina and Rita. Since May, income gains have been meager and July's decline was the largest since August of 2005. For October, analysts are once again calling for just a slight increase of 0.1%.

The last report said that personal consumption expenditures (consumer spending) fell in September by 0.3%. This followed no changes (0.0%) in the preceding two months. For October, forecasters are predicting a decline of between 0.6% and 0.9%. Even if the decline matches the 0.6% estimate, it would be the biggest drop since September of 2001.

A little later on Wednesday morning, the report on new home sales will be released. In the report for September, the Commerce Department said the seasonally adjusted, annualized rate of sales rose by 2.7% to 464,000. The increase was unexpected but the news was blunted by a revision to August's originally reported sales pace. It was trimmed from an originally reported 460,000 to 452,000. Moreover, September's reading was still the second lowest since January of 1991.

Inventories of homes on the market fell for a seventeenth straight month as builders cut back on construction. September's decline was a steep, 7.3% to a seasonally adjusted 394,000. This was the lowest level since June of 2004. With the pickup in sales pace, this reduced the turnover time to 10.4 months. This was down from 11.4 in August (originally reported as 10.9 months). August's was the highest since April of 1980.

Like the existing home sale figures, the improvement in new home sales reflected generally falling prices. Though the average new home price rose in September by $11,400 or 4.3% to $275,500, this was down by $16,700 or 5.7% from the average a year earlier. The median price fell by $2,000 in September or 0.9% to $218,400 but was down by a sharper $21,900 or 9.1% from the level in September of 2007. September's median price was a four-year low and the average price was the second lowest in four years.

But gloomy economic conditions are expected to have dampened buying demand in October. Current estimates range from a decline of 3.0% to 5.2% to a rate of between 450,000 and 440,000.

An important regional manufacturing indicator comes out on Thursday. This is the Chicago Purchasing Managers Index (PMI) from the Chicago branch of the National Association of Purchasing Management (now known nationally as the Institute for Supply Management). October's index for the highly-industrialized region came in at 37.8. Any reading below 50.0 generally reflects a decrease in activity relative to the preceding month. Not only was October's reading down from September's 56.7, it was the lowest reading since May of 2001.

Another strong contraction reading is anticipated for this month's index but the consensus prediction is for a slightly better number of between 38.0 and 39.0. In combination with exceptionally weak indexes for the New York and Philadelphia Fed areas, the regional data suggests that the national index for November (to be released December 1) will also reflect another sharp contraction of activity. October's ISM index was 38.9, the lowest since September of 1982

The last economic release of the day will be the final read on consumer sentiment from the twice-monthly surveys by the University of Michigan. In the preliminary release on the 14th, the overall sentiment index came in at 57.9. This was up slightly from October's final reading of 57.6. Nevertheless, it was still not much higher than June's final reading of 56.4 which was the lowest since 1980. The final reading for November of last year was 76.1 and for November of 2006 it was 92.1. Not much change from the preliminary figure is expected in this month's final reading.

The domestic markets and all government offices will be closed on Thursday but the markets will be open on Friday. Trading volumes will be light then but this will provide market participants with their last opportunity to make adjustments for the month.

10:30 AM EST : With no fresh economic data to provide drag, stocks are rebounding somewhat following two days of steep losses. But gains have been modest so far compared to recent swings (the average daily move for the Dow since the beginning of September has been plus or minus 298.77 points).

The rise in stocks has helped justify profit-taking in Treasuries this morning following steep gains in the last five sessions. The yield of the benchmark 10-Year Note declined by 31/100 yesterday (yield moves inversely to price) and in recent trade this morning, it had risen by 20/100.

There are no major economic releases slated for today. While there is no guidance from new indicators, it does not mean that the markets will not be volatile. Stock traders are looking for a turning point to the downtrend that, as of yesterday, had pulled the Dow down by 6,612.24 points or 46.68% from its October 9, 2007 record high of 14,164.53. More than half that loss came in the last three months.

But the overriding view of the economy is bearish. This view has been confirmed by a growing string of weak economic indicators -- many at record low levels. The weakness is widespread. The financial sector has been hit by the credit crisis stemming from poorly performing mortgages and the securities backed by them. Manufacturing, construction, and the service sector are all contracting. Unemployment is rising and consumer spending is falling.

The severity of the situation has been underscored by the extraordinary measures already taken by the Treasury and the Federal Reserve. There has been an economic stimulus package for taxpayers, a sharp reduction of interest rates, numerous new vehicles instituted for lending money to businesses including a major bailout package. Moreover, the situation has had global effects which have spurred actions by foreign central banks as well.

Against this backdrop, stock traders are caught between fear and hope. Government debt securities (Treasuries) have benefited from the retreat out of the stocks. The demand for the safety of Treasuries has pushed yields to historical lows. Today, however, bond traders are cashing in on recent gains.

Oil futures are up this morning but the January contract (the new front-month future) is currently still below $50.00 per barrel . . . .

LionMTS