Bonds Down on Reports, Dollar Up

U.S. 10-year Treasury bonds fell today on positive economic reports out of
the U.S. Bonds fell steadily this week, on mostly positive U.S. sentiment and
reports. Jobs numbers out earlier this week also helped to push bond prices
lower. Treasury bonds typically rise on economic weakness, and fall on strength,
so it is clear that traders have positioned themselves defensively in relation
to bonds, heading to the end of the year.

The dollar was up slightly versus the euro and the yen today, after some
positive economic reports out of the US. Retail sales rose more than expected,
and a key inflationary report also pointed towards economic growth. The dollar
fell back to near-record lows yesterday on underlying economic weakness. The yen fell today across the board as well. The yen has been struggling
lately under the strains of the carry trade, when investors borrow yen cheaply,
and then reinvest in more profitable assets.

Crude oil futures rose to new record highs today, on fears that Turkey will
invade Iraq to deal with Kurdish rebels. Any type of unexpected situations in
the Middle East usually equal rising oil prices, as the volatile region
represents a majority of the oil-producing nations in the world. Last summer, a
war between Israel and Hezbollah saw crude hitting prices that were a record
until that point. Natural gas futures rose about 1.5%.

Gold futures fell about 0.3% off recent highs, on a rising dollar. Traders
sold gold in favor of dollar strength, and despite rising crude prices. Gold
normally trades inversely to the dollar and with oil, and today gold traders
focused on dollar weakness, buying the precious metal as a hedge versus dollar
weakness. Copper futures also fell about 0.3%.

Grains were mixed today. Soybeans fell about 0.5%, while corn rose over 2%.

The broad indices rebounded from yesterday’s losses, green across the
board. Click

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Economic News

Retail sales climbed more than expected in