All Eyes on the Fed

U.S. 10-year bond prices continued to fall from 3-year records today, pushed
lower by rampant speculation that a Fed rate cut tomorrow is a guarantee.
Traders have fully priced in a rate cut, and some traders are even looking for a
50 basis point cut off the Fed funds rate. Also in the news helping to alleviate
concern were announcements that MBIA would receive $1 billion to avoid being
downgraded by credit agencies. Bonds typically rally on economic weakness and
fall on strength, so it’s clear that traders have braced for the worst heading
into the new year.

The euro rallied versus the dollar and the yen today, after European Central
Bank policy makers said they were worried about inflationary pressures,
prompting traders to bet that the Fed is leaning towards a rate hike sometime in
the future. Inflationary pressures usually equate to high growth levels and a
sound economy, and traders bought the euro on the euro-bullish news. The dollar
rose slightly versus the yen. The carry trade has been a major factor in yen
movements in the last few months, as traders buy and sell yen based on perceived
global market risk. The yen has been rallying on equity weakness and falling on

Crude oil futures continued to fall today, as traders push prices further and
further away from recent all-time record highs just off $100. Traders are
anticipating that U.S. supplies will rise this week, as a slowing U.S. economy
demands less and less energy to stay afloat. Crude shot to record highs over the
summer and fall on general global demand worries, but the credit crisis led
traders to worry that slowing growth would hurt energy demands. Those fears have
played out, and crude is falling accordingly. Natural gas futures fell just
under 2%.

Gold futures rose over 1% today on dollar weakness. Gold normally trades
inversely to the dollar and with crude oil, and today, gold traders chose to
focus on dollar weakness. Traders bought gold in favor of a weakening dollar.
Copper futures fell just over 1%.

Grains were up slightly today. Soybeans gained about 0.5% while corn was up

Stocks rose on Monday, despite another major write-down, as investors look to
the Fed to ease rates. Click

for the rest of today’s

Stock Market Recap

Economic News

No major news to report for the U.S.