Bonds Hover Near Yearly Highs

U.S. 10-year Treasury bonds inched towards 3-year record highs today. The 10-year note hit fresh 3-year highs on Friday last week, on general negative economic sentiment towards the U.S. A combination of housing and economic growth reports have led to widespread speculation that the U.S. is headed towards a recession. Traders normally buy bonds on weak economic news and sell on strength, so it's clear that traders are positioned defensively at this point.

The dollar was up moderately versus the euro and the yen today, staging a mini-comeback after major losses last week. The dollar accrued heavy losses versus the yen and the euro last week, on general negative economic sentiment towards the U.S. Separate housing and economic reports from the U.S. pointed to major weakness, and many traders are betting on a full-fledged recession to come in 2008. The carry trade has been the driving motivator for yen movement in the last months. Traders have been buying yen on equity weakness, and selling yen on equity strength.

Crude oil futures plummeted today, falling over 3%, on speculation that U.S. economic weakness will hamper global demand levels. Oil dropped on similar sentiments late in the summer after hitting all-time records, and just recently oil has done the same thing. Traders sold oil today on U.S. economic weakness, speculating that with slowing growth, U.S. consumers will have less to spend on oil. Natural gas was also down moderately for the day.

Gold futures fell about 0.5% on dollar strength today. Gold normally trades inversely to the dollar and with crude oil. Today, traders sold gold in the face of dollar strength, and as crude prices dropped. Copper also fell moderately on weak growth concerns for the U.S.

Stocks closed mixed in volatile trading on Monday, with the Dow and S&P 500 rising, while the Nasdaq fell. Click here to read the rest of today's Stock Market Recap.