8:30 economic data, namely weekly jobless claims, was better than expected at 450K new unemployment claims down 3K frm last week. Last week claims took an unexpected decline, down 27K; there was a sense that the claims last week may have been skewed due to Labor Day holiday and this week claims would increase as a result. That didn't happen. The reaction in the markets is a little strange, with better weekly claims we would expect the stock indexes to do better and a negative reaction in the bond market. That didn't happen either. At 9:15 the DJIA traded -37 and the rate markets were holding unchanged readings from yesterday's closes. Continuing Claims fell to 4.485 mln from 4.569 mln as many are now losing their unemployment, it isn't good news.

Also at 8:30 August producer price index, expected to be up 0.4% was right on; the core reading on wholesale inflation when food and energy costs are excluded was also on target, up 0.1%. Inflation fears hover in the minds of many but we see no reason to be concerned now that inflation will edge higher. Back in the day investors sweated and fretted over inflation fears, today the US economy needs some inflation, but with no pricing pressures as consumers continue to cut back spending and the housing sector still in depression the likelihood of any increase in inflation is nil.

One more data point at 8:30; the Q2 current account, the deficit in the 2nd quarter was -$123B compared to -$109B in Q1. The current account is the total of all money flows from all sources from and to the US. The US has run current account deficits for many years and will continue to do so because simply stated the US imports much more than we export.

At 9:30 the DJIA opened -20, the 10 yr note at 9:30 -6/32 to 2.74% +2 BP and mortgage prices -4/32 (.12 bp).

Finally today, at 10:00 a few minutes ago, the Sept Philadelphia Fed business index. The estimates were for the overall index was an increase to 3.8 frm -7.7 in August. It was another report that manufacturing and businesses are back-sliding; the index hit at -0.7, not nearly as firm as expected, August index -7.7. New orders fell to -8.1 frm -7.1, employment at +1.8 frm -2.7 and prices d 9.8 frm 11.8. The decline in new orders continues a recent pattern in the various regional manufacturing and business readings.

Trading is curious this morning; the data was mixed. Weekly claims were better than expected yet the stock market showed no supportive moves; the Philly Fed report was weaker than expected and yet no big improvement in equities. The rate markets also acting weaker, instead of a bounce on the 10:00 Philly Fed weakness, the 10 yr note yield increased slightly.