Bonds Flat, Euro Surges
U.S. 10-year Treasury bond prices were basically flat today, after spiking
higher yesterday on general economic worries. Credit problems have rocked the
international markets, causing the Fed to lower the discount lending rates for
banks by 0.5%. Bonds were basically flat though, after yesterday’s rally to
4-month highs. Bonds usually rise on economic weakness and fall on strength, so
it seems as though traders priced in today’s Fed cut yesterday, spurring a rally
that rested today.
The dollar fell today, and the euro rose, after the U.S. Federal Reserve cut
its discount lending rate, to hopefully stem broad economic losses. Global
equity markets have been rocked in the past few months, as a growing subprime
problem became a widespread credit crunch, resulting in major central bank
interventions. The U.S. Fed, ECB and BoJ all pumped billions of dollars into
banking systems to keep the institutions afloat amid a major cash crunch. The
yen has been gaining on the unfolding situation, as traders buy back previously
borrowed yen to raise cash, in order to cover risky asset positions. The dollar
fell against the Canadian dollar, and was flat on the British pound.
Crude oil futures rallied today after the Federal rate cut, which traders bet
would prevent further economic problems. Oil also rose as hurricane season kicks
off with its first storm, Hurricane Dean. Crude oil has been falling lately on
worries that an economic slowdown would lead to less demand in energy. Natural
gas futures rose over 2% on worries that Hurricane Dean could disrupt oil and
gas operations in the Gulf of Mexico.
Gold futures rose over 1%, as the dollar fell against the euro. Gold usually
trades inversely to the dollar and with oil, which is exactly what happened
today. Gold plummeted yesterday as traders sold gold to raise cash, to cover
losing positions and meet marginal calls in the wake of a credit meltdown.
Copper futures jumped nearly 3% on the Fed rate cut.
Grains rose today. Soybeans rose just under 2%, and corn gained just over 2%.
Stocks jumped significantly higher after the opening, following a rate cut
from the Federal Reserve. The averages gave back roughly half of their early
gains by 10:30 but moved steadily higher through the day. Click
here to read the rest of today’s
Stock Market Recap.