What a difference a resignation, or two, make
The November employment report showed a deteriorating labor market as the jobless rate increased to 6 percent, and nonfarm payrolls declined, reversing the upward trajectory that began in the spring. This was clearly bad news for the equity market. As if there hadn't been enough bad news with UAL on its way to bankruptcy court.

Less than an hour after the employment report, the White House announced the resignation of two key members of its economic team: Treasury Secretary Paul O'Neill and National Economic Council Chair Lawrence Lindsey. While Lindsey has been a long-time advisor to President Bush, his departure wasn't exactly a surprise, nor was O'Neill's. Viewed as a loose cannon, O'Neill never gelled with financial market participants.

Equity markets turned around sharply on Friday, ending up in the positive column at the closing bell. Despite Friday's uptick, equity prices were down on the week.

Treasuries like weak data
Economic data were on the anemic side all week and this helped lift Treasury prices and reduce yields. Friday's employment report was quite a bit worse than expectations with a higher jobless rate and a larger reduction in nonfarm payrolls than predicted by economists. This helped push yields down even further on Friday, particularly on the 2-year note. Treasury Secretary Paul O'Neill's resignation had little impact on the Treasury market; it mostly impacted the foreign exchange value of the dollar. If anything, O'Neill's resignation may be friendly news for the bond market since he was partly responsible (along with Undersecretary Peter Fisher) for suspending issuance of 30-year bonds. His resignation may allow the re-introduction of 30-year bonds (although that is questionable given Fisher's strong opposition.)