Bonds Jump on Housing Weakness

U.S. 10-year Treasury bond prices shot higher today, after a weaker than
expected housing reports fueled fears that housing weakness will lead to a
slowdown in economic growth. Traders have sent bond prices higher through the
summer on broad and far-reaching concerns that housing weakness could cripple
the entire U.S. economy. Many traders took the recent credit crisis as
confirmation of that fact, but bonds fell back after the Fed cut 2 key interest
rates, which was more than expected.

The euro sank across the board, on no real news. The euro has been hitting
new record highs almost daily over the last two weeks, so most traders were
looking for a correction after such a strong rally. The dollar was up slightly
versus the yen. The euro pairs were the most actively traded today. The dollar
rose against the Canadian dollar and the British pound.

Crude oil futures fell below $80 today, but rallied to close just over the
benchmark, as the dollar turned itself around against the euro. Crude has been
skyrocketing to record highs lately, as the dollar plummets to records versus
the euro. However, the dollar rally seemed to dampen crude’s move, and the price
per barrel fell back slightly today. Crude fell over 10% over the summer before
a late-season rally that sent prices to new record highs. Natural gas futures
gained over 4% on storm worries in the Gulf of Mexico.

Gold futures fell over 2% today, on a dollar rebound. Gold normally trades
inversely to the dollar and with oil; today, dollar strength versus the euro led
to the biggest day of gold selling since August. Gold has been rising steadily,
recently hitting 28-year highs on record oil prices and a falling dollar. Copper
futures jumped about 0.5% on Tuesday on strike worries.

Grains were mostly lower today. Soybeans fell nearly 5%, while corn dropped
over 5%.

Stocks closed mixed on Tuesday, with the NASDAQ rising, the Dow falling
and the S&P 500 closely more or less flat. Yet more depressing housing data hit
the market today, when the National Association of Realtors reported that
pending home sales fell to the lowest level since they began tracking purchases
in 2001. Click

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Economic News

Pending U.S. home sales dropped to the
lowest levels in recorded history in August.