Here’s What Gave Treasuries An Extra Push Today.

Treasuries finished higher and
equities lower after three top executives of Freddie Mac were ousted over yet-to-be
explained accounting issues.

Equity

US stocks pulled back today amid an announcement
that a federal probe is being launched to investigate employee misconduct at the
US’s second largest purchaser of US mortgages.  The pharmaceutical,
diversified bank, and semiconductor industries were also among the day’s worst
performers. Computer hardware, healthcare facilities, gold, and oil related
stocks were among the stronger issues (not just defensive sectors did well on
the day–a good thing).  Equities also lost ground on the unexpected drop
in wholesale inventories in April. The Nasdaq future
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was down 11.50
to close at 1197.50. The S&P 500 contract
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was down 9.25 to finish
at 977.00,
and the Dow
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was down 48 to finish at 8992.

Fixed Income

Treasuries were mostly higher as a result of
traders unwinding their long mortgage backed securities/ short Treasury spread
(reflected in the widening of the yield-spread between the two issues. On the
day, the price of the July Fed Fund future was up and is now reflecting a 58%
probability of a 50bp rate cut. The 10 year futures contract
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was up
-190 to close at 118-315; the 30 year
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was up -24 at 120-03; and the five year note was up -140 at 116-045
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.

Metals

July gold
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was down -.4 despite a
weaker US dollar and is most likely the result of the leap in speculative long
contracts in the futures market–now above 80,000, which is an all time high and
would indicate an overextended market. Silver
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was up .2 at 4.52. Copper
was down .15 at 76.85
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, and aluminum
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was down .0105
to close at .6540 on housing market concerns (mortgage market anyway).

Energy

July crude
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was down .18 to close at
31.27 on renewed assurances by OPEC members that a production cut is unlikely
for now. And, natural gas was down .0034 to
close at 6.280
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.

Currencies

The dollar was mixed today on light trading, as
Europe was on holiday. The big news in this market was the UK’s decision not to
join the euro for the time being, sending the pound lower against most currenies.  The USD index
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was
down by .18 and
finished at 93.38.