A surprisingly weak report on June manufacturing conditions in the mid-Atlantic region on Thursday finally gave traders a reason to buy U.S. Treasuries, and buy they did. Treasury prices rose and their yields, which move in the opposite direction of prices, tumbled for the first time in several sessions.

The soft manufacturing data led traders to believe that future reads on manufacturing would follow suit and could influence the Fed to slow down its campaign to hike short-term interest rates. The yield on the benchmark 10-year note that is used by lenders as a guide to set rates fell to its lowest level in a week. Although lower yields could result in a slight decline in mortgage rates, there is usually a lag of at least a day between the time a yield rises and falls and rates change. Mortgage rates today continued to edge up in response to recent increases in yields.

Economic Data Mixed
Economic news on Thursday left the markets uninspired, with Housing Starts in May and weekly first-time employment claims coming in close to flat. But the Philly Fed survey on manufacturing conditions got bonds riled, showing a decline to minus 2.2 from the May reading of 7.3. In addition, analysts were expecting the index to rise to 10. This is the first negative reading in more than two years and indicates contraction in the manufacturing sector. As a plus, the report showed no signs of inflation. New orders and delivery times took a dive and were largely responsible for the poor showing.

Housing Starts rose by a mild 0.2 percent to an annual rate of 2.01 million starts – below the forecast for 2.05 starts. Building permits, an indication of future starts, also came in below estimates, at an annual rate of 2.05 million – far below the revised 2.15 million permits issued in April. The good news in the report showed single-family home starts up a healthy 5.0 percent. First-time unemployment claims for the week ended June 10 rose by 1,000 to 333,000 – higher than expected – while the four-week average came in at 335,000, up 2,750. Continued claims, people collecting benefits for more than one week, rose 58,000 to 2.64 million. Techs Lead Wall Street to a Positive Close

Technology stocks assumed a leadership position on Thursday. The Nasdaq made a substantial gain due to optimism about the tech sector and a few outstanding gains. Chips surged again, and select stocks posted good increases. Apple rose 2.3 percent, while Sun Microsystems added 3.9 percent, and JDS Uniphase gained 1.97 percent. Cisco Systems was up more than 1 percent. But the big winner on the NASDAQ was Vicuran Pharmaceuticals, which soared 78 percent on news that Pfizer – a Dow Jones component – would acquire it.

Gains in the Dow Jones Industrials were modest by comparison. A total of 17 Dow members closed in positive territory, led by Honeywell, which added 2.0 percent. Alcoa and Exxon each rose more than 1 percent, with Exxon getting a boost from higher oil prices, which surged to $56.58 a barrel. Oil prices have risen 28 percent since the first of the year. GM led in losses with a 2-percent downturn, as uncertainty about the labor situation with regard to healthcare costs is taking its toll. On the other hand, Ford (not a Dow component) rose 1.8 percent on an upgrade. Boeing and Wal-Mart were the only other Dow components to lose more than 1 percent.

At Closing:
The Dow 30 Industrial Index rose 12.28 points or 0.12 percent to end at 10,578.65; the Nasdaq Composite index gained 14.23 points or 0.69 percent to close at 2,089.15, and the benchmark Standard & Poor's 500 Index closed up 4.35 points or 0.36 percent to end at 1,210.93.

The 30-year Treasury bond was up 23/32 in price with the yield falling to 4.36 percent versus a 4.40-percent closing on Wednesday.

The 10-year Treasury note was up 9/32 in price with the yield falling to 4.06 percent versus a 4.10-percent closing on Wednesday.

The 5-year Treasury note was up 5/32 in price with the yield falling to 3.84 percent versus a 3.88-percent closing on Wednesday.

AVERAGE mortgage rates (zero discount points) based on rates collected nationwide were:

The 30-year Conventional Fixed-Rate Mortgage was at 5.473 percent from 5.456 percent at Wednesday's close.

The 15-year Conventional Fixed-Rate Mortgage was at 5.089 percent from 5.051 percent at Wednesday's close.