With today's scheduled economic data in the books and suggesting slower economic growth overall, stocks are at their lowest levels of the day as bond markets, including MBS approach their best levels. Fannie Mae 4.0 MBS are now up 12/32nds on the day at 101-09, only 1/32nd off their high of the day. At 2.91, 10yr notes are also very close to their lowest yields of the morning. Meanwhile, stocks continue to weaken. The S&P index pushed past earlier lows, now at 1263.89. The morning's moderately weak economic data is part of a slightly bigger context of negative developments for risk markets, including overnight uneasiness surrounding Greece as well as yesterday's downgraded economic forecasts from the FOMC. Lenders are releasing rate sheets significantly improved versus yesterday's last offerings, in some cases, with improvements superseding the amount of price gains in MBS. If you have a rate sheet from before 830am this morning, or one that was otherwise conservative, there's even a chance for early reprices for the better.

The Commerce Department reports New Home Sales falling from 326k in April to an annual rate of 319k in May, slightly better than the 310k economists had forecast. After showing positive growth of 6.5 pct last month, single-family home sales fell 2.1 pct in the current report. Geographically, the Northeast was the obvious outlier, falling 26.7 pct while no other region fell more than 4 pct. Months of Supply ticked down from 6.3 to 6.2. Median Prices of new homes are down 3.4% year-over-year while the outright number of new homes for sale continues to progress into record lows--166k units this month vs 172 units in April.

Although barely perceptible on the 2-day chart of benchmark 10 yr notes, we can see this morning's yield range narrowing around 2.91 until a short but directional move upward just after 9am. That mini-spike followed an announcement from the International Energy Agency that it will release 60 million barrels of oil from government stockpiles in order to push oil prices down. The fleeting prospect of "cheaper energy," helped S&P's gain from their lows and pulled benchmark yields slightly higher. For now, it looks like this data has moved markets about as much as it's going to. S&P's, in fact, are several points weaker since opening, speaking to the entrenched weakness in the stock market. In other words, although the IEA report briefly moved markets, stocks in particular want "something more" in order to retest overhead resistance. 10yr notes are holding below 2.93, their highest yields since 830am, and Fannie Mae 4.0 MBS are similarly holding their 830am level of 101-05, currently up 10 ticks on the day at 101-07.

(Reuters) The U.S. Standard & Poor's 500 index will finish the year with a gain of just over 11 percent, gains equity strategists expect to be made mostly after the Federal Reserve's latest stimulus plan comes to an end this month, a Reuters poll found. Median forecasts from 46 respondents surveyed in the past week put the U.S. benchmark S&P 500 at 1,400 by year-end, one of a handful of global indexes polled quarterly by Reuters that analysts did not revise down from March. The S&P 500 is up just over 2 percent for the year, having recently cut gains after a string of weak data, especially in the job market, signaled an economic slowdown. Concerns about the euro zone debt crisis and an end to the Federal Reserve's stimulus plan later this month, were also met with a flight from risk. Earlier this month, the Nasdaq briefly dipped into the red. "We are still double from where we were two years ago; I think the market is doing great. We are in slowdown and correction but that's following a 30 percent gain from the August lows," said Bob Doll, chief equity strategist at BlackRock in New York, noting the stock market doubled from two years ago. For the Dow Jones industrial average, the survey showed a forecast of 13,000 for end-2011, up over 7 percent from its current level and 12.3 percent from the end of 2010. "The good news is that corporate revenue growth, earnings growth, free cash flow growth -- despite the not-so-good GDP number for the first of the year -- is pretty good," Doll said. The U.S. economy grew a paltry 1.8 percent, annualized, in the first quarter of this year. Economists have taken a hatchet to the outlook for the current quarter, which they don't think will look much better, and beyond based on a barrage of disappointing economic reports. The Federal Reserve has also downgraded its view on growth but for now at least it is offering no new stimulus to get the economy expanding more quickly. ( By Angela Moon )

Following another disappointing Jobless Claims report, bond markets are extending gains seen in the overnight session due to ongoing uncertainty surrounding Greece. Fannie Mae 4.0 MBS are up 10/32nds since yesterday's close at 101-06. 10yr Treasuries are gaining at a bit of a better pace into the rally, making up some ground against MBS outperformance yesterday. Yields are already down over 7 bps on the day to 2.91, just over one basis point higher than the year's lowest levels. To whatever extent current MBS prices hold steady or improve this morning, lender rate sheets are likely to improve versus yesterday's latest offerings.

Jobless Claims rose to 429k this week versus a revised 420k in the previous week. That 420k was an upward revision from an initially reported 414k, moving the 4 week average from 424.8k to 426.3k. This week's 429k initial claims read leaves that moving average unchanged, which is slightly higher than the 415k economists had predicted. Continued Claims fell to 3.687 million however, but while the decrease is ostensibly positive, the forecast had been for a slightly bigger drop to 3.665 million. Of note, the Labor Department says six states were estimated due to technical problems. That casts a shadow of doubt over the accuracy of this week's report.

The Federal Reserve Bank of Chicago's National Activity Index today rose to -0.37 after a reading of -0.56 pct in April. A zero value for the index indicates that the national economy is expanding at its historical trend rate of growth; negative values indicate below-average growth; and positive values indicate above-average growth. Two of the four broad categories of indicators that make up the index improved from April, but only the production and income category made a positive contribution to the index in May. Employment-related indicators made a small negative contribution to the index for the second straight month. Production-related indicators made a contribution of +0.05 to the index in May, up from –0.16 in April. Manufacturing production increased 0.4 percent in May after declining 0.6 percent in April, and manufacturing capacity utilization rose to 74.5 percent in May from 74.2 percent in the previous month. In contrast, the Institute for Supply Management’s Manufacturing Purchasing Managers’ Production Index declined sharply to 54.0 in May from 63.8 in April. The consumption and housing category contributed –0.36 to the index in May, up from –0.40 in April. Housing starts increased to 560,000 annualized units in May from 541,000 in April, and building permits rose to 612,000 annualized units in May from 563,000 in the previous month. Employment-related indicators made a contribution of –0.04 to the index in May, down slightly from –0.02 in April. Nonfarm payrolls increased by 54,000 in May after rising by 232,000 in the previous month, while average weekly initial unemployment insurance claims edged lower in May after rising by nearly 40,000 in April. The sales, orders, and inventories category also made a small negative contribution to the index in May of –0.02, down from +0.02 in April.