The more advanced risk of reprices for the worse would likely be seen if FNCL 4.5's fall under 101-28, which marks MBS only real support bounce so far this morning. Treasuries seem to have an eye on stocks so far this morning and have managed to catch a supportive bid after S&P's turned away from 1300. 10yr yields are right at 3.44 currently and FNCL 4.5's at 101-29. Reprice targets for MBS would first be seen at 101-27 and grow increasingly important the lower past that level. Reprices for the better, in order to be widespread, need FNCL 4.5's into the 102's for more than just a brief foray.

As the S&P ticks into the 1300's, 10yr notes refused to hold support at 3.44, but are not yet definitively on their way up to the weakest levels of the morning. Still, MBS have come down a few ticks with the FNCL 4.5 at 101-29. Lenders who priced early may consider reprices for the worse the longer that 4.5's stay in the high 101-20's.

***ISM U.S. MANUFACTURING INDEX FOR DECEMBER REVISED TO 58.5 FROM 57.0 PREVIOUSLY ***NEW ORDERS INDEX FOR DECEMBER REVISED TO 62.0 FROM 60.9 PREVIOUSLY *** MANUFACTURING EMPLOYMENT INDEX FOR DECEMBER REVISED TO 58.9 FROM 55.7 PREVIOUSLY *** NON-MANUFACTURING INDEX FOR DECEMBER UNREVISED AT 57.1 *** NON-MANUFACTURING BUSINESS ACTIVITY INDEX REVISED TO 62.9 IN DEC FROM 63.5 PREVIOUSLY *** NON-MANUFACTURING NEW ORDERS INDEX REVISED TO 61.4 IN DEC FROM 63.0 PREVIOUSLY *** NON-MANUFACTURING EMPLOYMENT INDEX REVISED TO 52.6 IN DEC FROM 50.5 PREVIOUSLY

U.S. DEC PENDING HOME SALES INDEX +2.0 PCT (CONSENSUS +1.0 PCT) TO 93.7 **** U.S. DEC PENDING HOME SALES -4.2 PCT FROM DEC 2009

In just over 10 minutes, we'll get one of the last two pieces of econ data this morning in the form of December Pending Home Sales. It's seen at +1% annualized rate, down from +3.5% last month. Forecasts ranged from -3.2% to +4.0%. Meanwhile, after several bounces into 3.42% pivot, 10yr yields are on the march higher. They have technical levels in the mid 3.44's, then 3.46 and 3.48. So far, 3.44+ (drawn from post 830am high yield marks, is holding up, but too soon to say if that will continue to be the case. FNCL 4.5's have shed a few ticks, and now sit at 101-30.

After retracing to around 3.44, 10yr notes are back down to test resistance in the mid 3.41's (call it 3.42 basically). After FOMC yesterday, that level got set up as resistance and we haven't broken lower since. It also has some recent history as a pivot point. FNCL 4.5's are up 3 ticks on the day now about a half a tick under 102-00. This brings MBS roughly in line with the midpoint of yesterday's range. 10yr tsy's need to get below 3.42 though, if the MBS rally stands a decent chance to continue.

After trading near 3.46 earlier this morning, the 10yr yield has rapidly fallen following weaker than expected econ data. Jobless Claims rose to 454k versus a consensus of 405k and a previous reading of 403k. In addition, Durable Goods orders were down 2.5% versus a forecast for +1.5%. In the initial downtick, 10yr yields met resistance before crossing 3.42 and have since retraced into the 3.43's

***DEC DURABLES EX-TRANSPORTATION +0.5 PCT (CONS +0.8 PCT) *** U.S. DEC DURABLES EX-TRANSPORTATION +0.5 PCT (CONS +0.8 PCT) *** U.S. DEC DURABLES EX-DEFENSE -2.5 PCT (CONS +0.6 PCT) *** US DEC NONDEFENSE CAP ORDERS EX-AIRCRAFT +1.4 PCT (CONS +1.5 PCT)

***(CONSENSUS 405,000) FROM 403,000 PRIOR WEEK (PREVIOUS 404,000) ***US JOBLESS CLAIMS 4-WK AVG RISE TO 428,750 JAN 22 WEEK FROM 413,000 PRIOR WEEK (PREVIOUS 411,800) *** US CONTINUED CLAIMS RISE TO 3.991 MLN (CON. 3.85 MLN) JAN 15 WEEK FROM 3.897 MLN PRIOR WEEK (PREVIOUS 3.86 MLN) *** US INSURED UNEMPLOYMENT RATE RISES TO 3.2 PCT JAN 15 WEEK FROM 3.1 PCT PRIOR WEEK (PREV 3.1 PCT)

(Reuters) - Standard & Poor's cut Japan's credit rating on Thursday for the first time since 2002, saying Tokyo lacked a plan to deal with its mounting debt, in a warning that will rattle other heavily indebted rich nations. The agency reduced Japan's long-term sovereign debt rating by one notch to AA minus, three levels below the highest possible rating. It said Japan's fast-aging population, persistent deflation and the loss of the coalition's upper house majority had compounded the government's fiscal challenge. Politicians and credit ratings agencies have been warning for years that Japan needs to lower its public debt, by far the worst among rich nations at double the size of its $5 trillion economy, but progress has proved elusive.