Bonds Rally on Credit, Growth Worries

U.S. 10-year Treasury bond prices shot higher today, on concern that the U.S.
credit crisis has yet to run its full course, and that there are more damages to
be announced soon to come. Traders today bought long-term U.S. bonds, to secure
some long-term safety in this volatile market. Fed fund futures are pricing in a
100% chance of a rate cut at the September meeting, if not before.

The yen rose against the dollar and the euro today, as U.S. equities took a hit on credit worries. Global equities have been under pressure in the past few weeks, as subprime mortgage defaults led to a spreading global credit problem. The central banks of the U.S., Europe and Japan have collectively pumped hundreds of billions of dollars into the international banking systems to stave off a collapse. Equity unrest has caused the so-called carry to unwind, as traders offload liquid assets (bought with borrowed yen) to cover riskier assets. As the equity markets continue to fall, more and more traders are buying back borrowed yen to cover positions, which sends the yen higher.

Crude oil rose about 1% today, as a tropical storm forms in the Atlantic, a
potential threat to energy supply lines. Crude has been falling fairly steadily
for the past 2 weeks, on concern that slowing U.S. growth will seriously dampen
energy demand. Today, we saw some hurricane disaster speculation, in the form of
oil buying. Natural gas futures also gained about 1% on hurricane worries.

Gold futures fell about 0.2% as the dollar rose against the euro. Gold
normally trades inversely to the dollar and with oil; today’s dollar strength
led to gold selling. Copper futures rose fell 2.2% on concerns that slowing U.S.
growth will slow demand for copper.

Grains mostly fell today. Soy dropped 1.8% and corn fell just over 1%.

Wall Street continues to take a beating on
Tuesday, as stocks move farther into the red. Heading into the last hour, the
major averages are trading near their intraday lows. Click

to read the rest of today’s

Stock Market Recap

Economic News

Wholesale inflation rose less than
expected last month.

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