Bonds, Dollar Lower on Rate Cuts
U.S. 10-year Treasury bond prices plummeted today, as traders speculate that
lower interest rates will fuel inflation, and also on the heels of a positive
growth manufacturing report. Bonds recently reached yearly highs, on
expectations of a rate cut, but bonds have since fallen back on the
larger-than-expected Fed action. Bonds typically rise on economic weakness and
fall on strength, so traders are viewing the recent Fed cut as a positive factor
the U.S. economy.
The dollar sank against the euro and the yen today, as traders bet that the
Fed will continue to lower interest rates, possibly as soon as this year. Dollar
worries were also exacerbated on a report that Saudi Arabia is considering
dropping the country’s link to the dollar. All in all, the dollar has suffered
at the hands of the Fed rate cut on Tuesday. On anticipation of a cut, traders
have sold the dollar for the past month, and once the cut hit the market, the
dollar plummeted. The dollar also plummeted against the Canadian dollar and the
Crude oil prices rose about 1% today, on speculation that a falling dollar
will boost demand for oil. Oil rose when the Fed cut rates, on hopes that looser
lending practices would lead to economic growth and energy demand. Oil is
trading at record highs right now, around $83 a barrel. Natural gas futures fell
about 3% on comfortable supply levels.
Gold jumped 2% today, as the dollar fell. Gold moved close to 30-year highs
today, as the dollar plummeted against the euro. Gold normally trades inversely
to the dollar and with oil; traders were selling the dollar today in favor of
gold safety. Copper futures rose about 0.5% on positive U.S. growth sentiment.
Grains rose today. Soybeans gained about 2%, and corn rose nearly 3%.
Stocks declined on Thursday, not surprisingly after the large two-day
run-up. Today’s Market Bias page showed a number of bearish signals, including
multiple CVR sell signals. As mentioned earlier, with the market trading back
above the 200-day MA, these signals tend to suggest the time to lock ion gains
may have arrived. That turned out to be the case once again today. Click
here to read the rest of today’s
Stock Market Recap.