After several days of pushing higher, yields are coming back down today as the markets adopt a more cautious tone. After a string of better than expected numbers, economic data released today in the US – Initial and Continuing Jobless Claims as well as the Trade Balance – is simply meeting expectations, and corporate earnings season (kicked off this week) has been lackluster so far. This morning, worse than expected earnings at JPMorgan have influence a negative tone in the market.

Additionally, while there have not been any significant setbacks in terms of the developing European plan to bolster its banking system, there has not been a lot of progress either.

Data tomorrow includes US Retail Sales, Consumer Sentiment, and Business Inventories. For Canada, it is limited to Manufacturing Shipments.

The bond market has continued selling off this morning as several reasons for optimism have recently emerged. In Europe, the epicenter of most of the recent problems, the ECB has reinitiated a program of providing loans of up to one year to member banks, in addition to resuming the purchase of covered bonds. Both measures combined improve the resiliency of the European banking system.

Additionally, Initial and Continuing Jobless Claims for last week in the US were stronger than expected (building on yesterday’s ‘beat’ in ADP Payrolls), while in Canada, the Ivey PMI for September was also stronger than expected.

Friday morning is important for Canadian data. The US releases the Employment Report for September, along with Wholesale Trade and Consumer Credit numbers for August, while Canada also releases its Employment Report for September.

The bond market rallied throughout yesterday and into this morning, and we are essentially back to where we were on Tuesday morning. In yesterday’s commentary I indicated that there hadn’t been an identifiable reason for the selloff but throughout the day on Wednesday the market was reminded that Europe’s sovereign debt problems have (still) not been dealt with adequately, China’s accumulation of commodities seems to be slowing, and our friends down south appear to be headed toward an embarrassing standoff over the terms and conditions associated with the need to raise the legal limit for Federal debt in the US. Unfortunately, Republicans and Democrats appear to be miles apart and the clock is ticking.

In terms of data released this morning, a slew of US numbers were generally in line with expectations: Initial Jobless Claims, Continuing Jobless Claims, Producer Price Index, and Advance Retail Sales were all close to what the market predicted. For Canada, the New Housing Price Index was a tad weaker than expected.

US CPI and Consumer Sentiment are the big releases for Friday.

Generally weak data was released in North America this morning. For Canada, Manufacturing Sales growth of -0.8% in November fell well short of the +0.3% reading the market had been expecting. The slide was caused entirely by a decrease in the motor vehicles / parts segment.

For the US, Housing Starts for December at 529k annualized were also weak, but there was a strong pickup in building permits, and some weak results released by some US financial institutions this morning are also weighing on the market.

Balancing off these generally disappointing items are strong earnings results in the tech sector and decent results in the latest auction of Portuguese debt.