Bonds Sink Despite Weak U.S. Data
After rallying yesterday, U.S. 10-year Treasury bond prices plummeted today,
on comments from Fed Chief Bernanke that hinted that the Fed will cut rates
before the year is out. Bond prices typically rise on economic weakness and fall
on strength, so Bernanke’s comments were taken as a positive sign for bonds and
the economy. Bonds hit 3-year highs last week, on general anxiety and concern
stemming from U.S. housing and credit losses.
The dollar continued to rebound against the euro and the yen today, on
positive sentiment surrounding the U.S. equity rally this week. Early in the
week, Citigroup announced that foreign investors would inject $7.5 billion to
help cover subprime losses, and the market hasn’t looked back since. The dollar
has pulled away from all-time record lows against the euro, and the yen has also
been strengthening on a reversal of the popular carry trade. The yen down
against the euro and the dollar, as risky-hungry investors put their money into
the carry trade.
Crude oil futures fell slightly today. Crude is down around 10% from record
highs just off $100, which the contract hit last week. Crude prices skyrocketed
through the end of the summer and into the fall, propelled higher by high levels
of demand. Crude prices have plummeted in the last week, after a U.S. report
showed that crude supplies fell less than expected, and also on worries that
slowing U.S. growth will hurt demand. Natural gas futures fell just under 2%.
Gold futures fell over 1%, driven lower by falling oil prices. Gold normally
trades inversely to the dollar and with crude oil. Today, traders chose to focus
on falling energy prices, and sold gold on that sentiment. Copper futures gained
about 2.6%.
Grains were mixed. Soybeans fell over 1%, and corn jumped 5%.
Stocks closed out the week with a mixed performance on Friday, with the
Dow and S&P 500 closing higher, while the Nasdaq closed lower. Once again,
financial stocks lead the advance, after the Bush administration put together a
plan aimed at saving the sub-prime home loan market. Click
here to read today’s
Stock Market Recap.
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