Bonds Recoil, Stocks Await Jobs

This week's economic data is hinting at a bottom in housing and suggesting the rest of the economy isn't heading over a cliff. In an odd twist, the stock market remained unconvinced Wednesday, while the bond market bought the argument.

A jump in mortgage applications and mortgage refinancing combined with two employment reports to fuel hopes that the economy is headed for a soft landing rather than a hard one.

The bond market, which veers toward worrying about a hard landing, pulled back Wednesday on the news.

Stocks, which tend to embrace the notion that the economy could reaccelerate, weakened as year-end performance-chasing muddles the trends.

"Bonds didn't have much more room to go" on the upside, says James Paulsen, chief investment strategist at Wells Capital Management. "It would take a real disastrous number to keep going down from the 4.42% yield on the 10-year."

The 30-year bond dropped 12/32 in price while its yield climbed to 4.6%. The 10-year note fell 10/32 to yield 4.48% and the two-year note slipped 4/32 to yield 4.57%. Bond prices move inversely to yields.

The Dow Jones Industrial Average slipped 0.2% to close at 12,309.25 while the S&P 500 finished down a hair at 1412.90 and the Nasdaq Composite lost 0.3% to close at 2445.86.

The proof of this week's upbeat economic message will come in Friday's payrolls report. The consensus estimates are that the U.S. added 105,000 jobs In November, up from October's 92,000 new jobs.

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