Bonds Fall After Hitting Yearly Record

U.S. 10-year Treasury bonds fell slightly, after hitting fresh 3-year record
highs on pervasive negative U.S. sentiment. Bonds have rallied big since the new
year began, on never-ending financial writedowns, a withering housing market,
credit worries and now, bad corporate earnings. Dollar weakness and rising
energy prices have also led to traders buying longer-term bonds as a safety from
market troubles. Bonds typically rally on economic weakness and fall on
strength, so it’s clear that traders have taken a defensive position relative to
bonds to start the new year.

The dollar rallied from extended lows versus the euro and the yen. The dollar
has been under major pressure lately both versus the euro and the yen, on
negative U.S. economic sentiment. Traders are concerned that U.S. credit and
housing weakness will spread to other areas of the economy and lead to a
recession. Yesterday, the dollar hit new lows versus the yen, but rallied on the
euro. The dollar is trading just off all-time record lows versus the euro.
Today’s action was uncharacteristically light.

Crude oil futures fell around 2% today, on trader speculation that a U.S.
economic slowdown will lead to a significant decline in energy demand. With a
growing economy, corporations and individuals need more fuel to grow business
and carry on, but in a slumping economy, those demands will probably drop. Crude
has fallen recently on similar concerns, only to rebound on supply concerns.
Natural gas futures were down slightly.

Gold futures fell about 1.7% on dollar strength and falling oil prices. Gold
normally trades inversely to the dollar and with crude oil, which is exactly
what happened today. Traders normally buy gold as a safety against energy and
U.S. weakness, and traders sold today on exactly those sentiments. Copper
futures fell over 2% on economic concerns.

Grains were lower today. Soybeans fell about 2%, while corn dropped 1.2%.

The major indexes closed a choppy session moderately lower. Click

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Stock Market Recap
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Economic News

U.S. CPI rose 0.3% in December, more than
expected.