Friday: Not Much on the Docket; Fed Debate Intensifies

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By John J. Edwards III
Staff Reporter

The bond market celebrated the only available signs of increasing unemployment Thursday, rallying on the surprisingly high number of

initial jobless claims

for the week ended Saturday.

The yield on the benchmark 30-year Treasury bond eased to 6.91% as jobless claims stayed at 347,000 for a second week. Economists had expected claims of 335,000, but one top economist said the higher number has to be taken with a large grain of salt.

"The fact that this week

claims stayed the same rather than falling back is a sign of weakness, but a third to a half of that is an effect of the floods," said Mickey Levy, chief economist at

NationsBanc Capital Markets

. He was referring to the devastating Midwest floods, which have unnaturally depressed hiring in that region.

Nevertheless, Levy said, the economic slowing he's long forecast is definitely taking hold. There's just one problem: the amazing 4.9% unemployment rate reported last week for April. "What's really holding back the market, and maybe the

Fed

, is the low unemployment rate," he said. "If it weren't for the unemployment rate, the market would be a lot better."

The Fed almost definitely would hold off on raising rates at its May 20 policy meeting if the unemployment rate were closer to the 5.2% level it had been hanging around, Levy said. But with what Wall Streeters call a 4-handle on the number, it's now a toss-up in his view.

Friday brings the quietest day in a quiet economic-data week. Levy, like many other observers, is most looking forward to Tuesday's

retail sales

report for April. He said it's likely to show more signs of weakness -- cheering the Street.

Friday's numbers

:

Fed speech

(10:30 a.m. EDT):

San Francisco Fed

President Robert Parry addresses a business group in Portland, Ore.