Bonds Rocket Higher on Housing Weakness

U.S. 10-year Treasury bond prices shot higher today, after a government
report showed that housing starts fell to 14-year lows last month. The housing
market has been major focus for traders and investors, who are worried that
housing weakness will spread to other areas of the economy, similar to the
subprime mortgage fallout. Bond prices are trading near yearly highs set a few
months ago.

The yen initially fell on what traders saw as U.S. equity strength, following
unexpected tech reports in the U.S. yesterday. However, as stocks gave up gains,
the yen turned around and was up versus the dollar and the euro. The yen has
been trading under the influence of the carry trade dynamic, in which traders
borrow yen cheaply to invest elsewhere. On equity weakness, the yen rises as
traders buy back borrowed yen. The euro was also higher versus the dollar, but the major action surrounded
the yen rebound.

Crude oil fell fractionally after hitting new record highs today. Crude has
been surging over the last few days on worries that Turkey will invade Northern
Iraq to fight Kurdish guerillas. The U.S. has asked Turkey not to intervene, but
it seems more and more that Turkey is getting ready to attack. Any volatile
situations in the Middle East have been rising prices for oil, because of how
much of the world’s supply comes from that region. Natural gas futures rose
about 1.2%.

Gold futures were also down slightly, about 0.5%. Gold futures fell in line
with oil. Gold normally trades inversely to the dollar and with oil; today’s
action revolved mostly around crude weakness after hitting new highs. Copper
futures also fell, down around 1.4%.

Grains were lower today. Soybeans fell about 0.3% and corn dropped 0.7%.

Stocks closed mixed on Wednesday, with the S&P 500 and Nasdaq rising, while
the Dow declined. Click

to read the rest of today’s

Stock Market Recap

Economic News

U.S. housing starts fell to the lowest
levels in 14 years in September.