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Jobless claims steady while productivity rises

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Jobless claims for the latest week fell by 20,000 to 390,000, which is below the key level of 400,000 most economists consider the division between an improving or weakening economy, while the four-week moving average, which smoothes out the week-to-week volatility, rose by 250 to 402,000.

The number of Americans who continue to collect unemployment insurance benefits rose by 4,000 to 3.58 million, the highest since early September. The insured unemployment rate held steady at 2.8%.

Meanwhile, productivity in the non-farm business sector expanded 4% in the third quarter, as output was up 4.1% and hours worked only nosed higher, yet showed the first increase since the early months of 2001. Hours worked rose 0.1%.

Economists looked for productivity to increase 4.2%. Compensation continued to climb, and adjusted for inflation was up 2.9%, the most in two years. Unit labor costs rose 0.8% after a 2.2% rise a quarter earlier.

Because hiring is so weak, the strong productivity numbers have been attributed to technological advances and the ability of a fewer number of workers producing at a more efficient rate.

In the manufacturing sector, productivity rose 5.9%, up from 4.2% in the second quarter but shy of the first quarter's 9.7% surge.

Real hourly compensation at factories - which takes inflation into account - was up 2.6%, the most in three quarters.

Shares of Cisco Systems (NASDAQ:CSCO) $12.96 are the most actively traded stock in pre-market action at $12.30 after the company reported earnings last night that beat estimates, but trade lower after the company gave guidance of a flat quarter ahead, which was below analyst's forecast.

Also active in pre-market are shares of Yahoo! Inc. (NASDAQ:YHOO) $17.34 at $16.17. The stock trades down 6.7% after Softbank said last night that it sold 17.5 million shares for $294 million, reducing its stake in the company to 4% from 7%. Prudential also downgraded the stock to "hold" based on valuation, with a price target of $14.

Stock futures are under some selling pressure this morning and has traders looking at a lower open. S&P futures (sp02z) are down 10 points at 915, NASDAQ futures (nd02z) are lower by 23 points at 1,045 and Dow futures are off 87 points at 8,680.

Fair value for the S&P 500 today is $0.22. That price will not change during the session. HL Camp & Company has their computers set for program buying at $1.52 and set for program selling at $-1.74. Fair value for the NASDAQ-100 today is $1.98.

Treasuries are seeing some brisk buying this morning and adding to some sell side pressure in stocks. The benchmark 10-year December futures (ty02z) 114'150 +0.54% is jumping higher while YIELD ($TNX.X) falls to 3.94%. The longer-dated 30-year December futures (us02z) 111'13 +1.36 are seeing the bulk of buying as investors look for higher YIELD, as the YIELD on this bond ($TYX.X) falls to 4.944%. We spent some time on the 30-year price and YIELD charts yesterday in the market monitor and this morning's action looks defensive.

Jeff Bailey

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