Bonds Rally on Weak Housing Numbers

U.S. 10-year Treasury bond prices rallied today, after two negative U.S.
housing reports were released today. Housing problems and credit problems
combined have led to major trouble in all types of markets, and traders are
betting that conditions will become worse, and that the U.S. economy could be
entering a recession. Traders bought bonds today as a safe-haven from widespread
negative economic sentiment, pushing prices back towards 3-year highs.

The yen fell against the euro and the dollar today, after the ECB injected
$500 billion into the banking system to maintain credit lines and soothe nervous
investors. Trillions of dollars have been injected into the global banking
system over the past few months, as the credit crisis continues to unravel, and
losses continue to emerge. The cash was meant to boost investor confidence
towards the global economy, which it did. The yen fell as confident traders took
on more risk, borrowing yen and investing in more profitable and risky assets.
The so-called carry trade has been a deciding factor in yen movement in the past
months, and looks to continue to do so. The dollar was flat on the euro, because
all the action concerned the yen.

Crude oil futures fell over 1% today, on general concerns that slowing U.S.
growth will dampen energy demand. Crude has fallen off recent record highs on
similar concerns, as more and more traders are betting that the U.S. economy is
slowing down, and that will affect energy demand and prices. Natural gas futures
rallied about 1.5%.

Gold futures rallied 1% today. Gold normally trades inversely to the dollar
and with crude oil, and today, gold did exactly the opposite. Gold futures
rallied despite dollar strength and falling oil prices, so there could have been
some underlying factors at play here. Copper futures fell fractionally today.

Grains were lower today. Soybeans fell 0.5% and corn fell 1.5%.

Stocks closed higher in choppy trading, after posting the biggest two-day
decline in more than a month. The ECB injected more than $500 billion into the
banking system in an effort to ease problems in the credit market. The BoE
offered $20 billion to U.K. based banks. Click

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Economic News

Housing starts fell unexpectedly in

Building permits fell to 14-year lows in November.