Stocks Fall on Jobs and Housing Concerns

U.S. stocks came under pressure Thursday after disappointing readings on home sales and employment.

Early in the session, earnings and financial worries vied for the upper hand, but stocks were pushed lower by economic data.

The Dow Jones industrial average is down 39 points to 7847, the S&P 500 is down 3 points to 841 and the Nasdaq is down 7 points to 1639.

U.S. existing home sales in March dropped more than forecast by 3.0% against a surprise 4.9% surge in February. Dimitry Fleming, an economist at ING, said Thursday's report weakens any notion that the housing market is stabilizing.

"Prospects for an immediate recovery remain depressed as fears of surging unemployment and further price declines continue to push away buyers from the market," he said.

Jobs data also pulled on stocks. Initial claims for employment benefits rose to 640k and continuing claims rose to a new high of 6.137 million.

"This is another weak report, and provides further evidence that the U.S. labor market continues to feel the punch from the slowing economic environment," said Ian Pollick, an economist at TD Securities.

Tech earnings and unexpectedly strong European data put an upbeat tone into early trading. Apple earned $1.33 per share in its second quarter versus an expected $1.08 cents per share. Similarly, eBay earned 39 cents compared to the 34 cents expected.

The euro zone April manufacturing PMI hit a six-month high of 36.7 versus the 34.7 expected. The Stoxx 50 is down 4 points to 1943, the UK FTSE 100 is up 15 points to 4045 and the German DAX is down 30 points to 4565.

European stock markets closed with the Stoxx 50 down 13 points to 1934, the UK FTSE 100 down 12 points to 4018 and the German DAX down 56 points to 4538.

In Canada, retail sales excluding autos rose 0.6% compared to the previous month, Statistics Canada said. Economists had been expecting a 0.2% rise. The S&P/TSX composite index is up 55 points to 9334.

Treasuries Fall After U.S. Announces $101 Billion in Coupon Supply

Supply trumped Fed buying on Thursday, pushing Treasury yields higher.

The Treasury Department said it will sell $129 billion in debt next week, including $101 billion in coupon notes. The sales begin Monday and include $40 billion in two-year notes, $35 billion in five-year notes and $26 billion in seven-year notes. The remaining $28 billion is for a six-month bill sale.

The size of the coupon sales was roughly in line with expectations, but it was more heavily weighted toward the longer maturities than expected, contributing to a steeper yield curve.

U.S. two-year yields are down 0.8 bps to 0.95%, with five-year yields up 0.7 bps to 1.90%, 10-year yields up 0.8 bps to 2.95% and 30-year yields flat at 3.81%. The Eurodollar September 09 contract is up 3.5 ticks to 98.88. The yield curve is steeper, with the 10/2-year spread up 1.7 bps to 199.74 bps.

The Federal Reserve has embarked on a $300 billion quantitative easing effort in order to keep borrowing rates from rising. As part of that effort, the Federal Reserve Bank of New York bought $7 billion of notes maturing in three to four years on Thursday.

Yields on two-year Canadian government notes are down 1.9 bps to 0.99%, with five-year yields up 4.4 bps to 1.94%, 10-year yields up 7.0 bps to 3.01% and 30-year yields up 2.9 bps to 3.76%. The September 09 BAX contract is up 1.0 tick to 99.59.

In Germany, returns on two-year German notes are down 2.1 bps to 1.44%, with five-year yields up 0.8 bps to 2.44%, 10-year yields up 0.6 bps to 3.22% and 30-year yields down 3.5 bps to 3.97%.

Yields on UK two-year notes are down 15.8 bps to 1.28%, with five-year yields down 3.4 bps to 2.50%, 10-year yields up 7.1 bps to 3.52% and 30-year yields up 2.3 bps to 4.42%.

Canadian Dollar Shoots Higher Following BOC's QE Framework

The Canadian Dollar is holding major gains following the release of the Bank of Canada's Monetary Policy Report.

The U.S. dollar is down 0.0116 to 1.2274.

The report was relatively in line with the growth forecasts and statement the bank released on Tuesday after cutting rates to 0.25%, according to some economists. The main highlight of the report was an annex outlining a framework for quantitative easing.

According to some strategists, the framework lacked any concrete plans, which is supporting the Canadian dollar. Following the release of the report, Bank of Canada Governor Mark Carney said in a press conference that the bank is not firmly committed to using the quantitative easing tools.

"There was a lot of buildup for nothing," RBC Capital Markets senior currency strategist David Watt said.

USD/CAD dropped over a full cent after the release of the report, hitting a session low of 1.2238 CAD. The cross managed to recover some of its losses, but remains near the bottom of its recent range, trading just below 1.23 CAD.

Shaun Osborne, chief currency strategist at TD Securities, said he is not surprised that the quantitative easing framework lacked any major details. He said market expectations were out of line with what the Bank of Canada was signalling.

"I think the market was expecting the bank of Canada would rush out and buy bonds after releasing the framework," he said. "We weren't expecting the bank to rush into this plan. Unless things get much worse the bank won't use quantitative easing measures."

Osborne said there is room for USD/CAD to go higher in the short term, but that any move to 1.25/1.24 CAD is generally seen as a selling opportunity.

Sacha Tihanyi, currency strategist at Scotia Bank, said that although the framework lacked any major details, the quantitative easing issue could weigh on the Canadian dollar.

He said his bias is for USD/CAD to trade closer to 1.18 CAD, but that traders will be hesitant.

Watt said his bias is still for a weaker Canadian dollar. He said he expects the economy to continue to weaken, which could put more pressure on the loonie. He said the current optimism is based on a "false bottom."

Elsewhere in foreign exchange, the U.S. dollar is down 0.16 to 97.87 against the yen and the Dollar Index is down 0.502 to 85.822.

The euro is up 0.0063 to 1.3069 against the U.S. dollar, down 0.0081 to 1.6044 against the Canadian dollar, down 0.0046 to 0.8927 against the pound sterling and is higher by 0.44 to 127.91 against the yen.

The pound sterling is up 0.0146 to 1.4638 against the U.S. dollar and down 0.0002 to 1.7966 against the Canadian dollar.

WTI crude oil is up $0.21 to $49.06. The front month gold contract at the Chicago Board of Trade is up $14.90 to $907.70 per ounce.

All data taken at 12:22 p.m. EDT.

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