The persistent steepness of the curve also served notice that initial equity gains were not credible. Initial jobless claims plunged 28K to 379K, but the auto retooling seasonal factors continue to play havoc with this series and it was summarily ignored.
Leading indicators came in unchanged, exactly as expected. But rumors and indications that the Philly Fed business outlook, a measure of factory output in the Philadelphia area, would come up short proved insufficiently pessimistic. The the index fell from 22.2 to 6.6, with all its components in tow -- a sign that the economic recovery is weakening.
Just prior to the data one shop was a buyer of 5,000 September five-year notes and along with the Philly rumors this kept prices elevated. The September bond closed up 11/32 at 104-17, while the two-year note and 30-year bond spread topped +290 basis points for a gain of eight basis points as the front-end sped higher into the close amid reports from The Wall Street Journal Online that former telecom Goliath WorldCom could declare bankruptcy as early as Monday.