What Are Bonds Saying?
Stock index futures started off this event-filled week on a negative note.
News of a healthy housing sector failed to inspire any buying as traders focused
on the UN arms report. Existing home sales in December jumped by 5.2% to an
annual rate of 5.86 million units. Chief UN weapons inspector Hans Blix
announced today that Iraq has not fully accepted disarmament as they have found
evidence that links Iraq in developing nerve gas. Blix also stated that they did
not find any evidence that Iraq is trying to revive their nuclear weapons
program.
However, the bottom line in today’s report was that the UN still needed more
time to come to a final conclusion, but no deadlines were given. Today’s news
adds further fuel to the fire that we are headed closer to war with Iraq. Stocks
continued to slump as traders are worried that a war with Iraq will dampen
economic growth. The March S&P contract
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the March Dow contract
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Nasdaq contract dropped 11 to 989.00
Despite weakness in stocks, treasury futures also declined. Treasuries dipped
today due to UN inspectors needing more time in deciding whether or not to force
Iraq to disarm by force. Bonds also declined today as rumors that Saddam
Hussein had accepted exile made their way around the floor. The March 10-year
contract
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Crude pulled back today after hitting two-year high last week. Due to the
outcome of the UN weapons report, an attack on Iraq could be delayed for months.
Head of the International Atomic Energy Agency, Mohamed El Baradei, asked the
council for a few more months as doing so “would be a valuable investment
in peace because they would help us avoid a war.” However, crude prices
were supported by a report which said that a  Venezuelan recovery to
pre-strike crude production levels might take at least six-months after the end
of the strike. March crude
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Gold pushed its six-year high even higher as the shiny metal continued to be
propped up by “safe haven” buying. February gold
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gained 1.6 to 369.40.
The dollar once again lost ground against the Euro. The March Euro contract
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PowerRating) gained 0.00180 to 1.08320. Meanwhile, the March dollar index
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PowerRating) actually gained 0.10 to 99.54 after slipping earlier in the session.
Look for volatility to increase this week as we have a plethora of economic
news and events. Tomorrow we have durable goods and consumer confidence, as well
as the start of a two-day Fed meeting, and President Bush’s State of the Union
speech later in the evening.