Bonds Sink Further on Inflationary Report

U.S. 10-year Treasury bond prices continued to fall away from 3-year highs
today, after an inflationary report showed unexpected pressures in the U.S.
economy. Bonds rallied through the end of the summer and into early winter, on
overall negative sentiment towards a slowing U.S. economy. Rate cuts also helped
to push bonds higher, as traders bought on underlying, pervading negative
sentiment. Traders positioned themselves very defensively heading into the end
of the year, but look to be relaxing some of those bets.

The dollar surged versus the euro and the yen today, after an economic report
showed that U.S. consumer inflation rose the most in 2 years during November.
Traders bought the dollar on speculation that with inflationary pressures
increasing, the Fed will not be able to cut rates as expected in January.
Traders around the world are watching for more rate cuts from the U.S., but
rampant inflation would end any hopes for more rate cuts. The yen fell on the
dollar but rose on the euro. Traders were mostly focused on dollar strength
today after the report.

Crude oil fell about 0.4% today. Crude has been trading choppily in the past
few months, as U.S. economic speculation about economic growth continue to
affect projected demand levels. Traders bet that a slowing U.S. economy would
equate to a slowdown in energy prices, and the positive reports this week have
led to a moderate pullback, after oil was falling from highs. Natural gas
futures fell over 2%.

Gold futures fell about 0.8%, in line with a strong dollar and falling energy
prices. Gold normally trades inversely to the dollar and with crude oil, which
is exactly what happened today. Traders sold gold in the face of a dollar rally
and churning crude oil. Copper futures were flat.

Grains were higher today. Soybeans rose just under 1%, and corn rallied about

Stocks declined on Friday, after a jump in the CPI, bearish comments by Alan
Greenspan, and Citigroup’s $49 billion SIV bailout. Click

to read the rest of today’s

Stock Market Recap

Economic News

U.S. consumer prices rose the most in 2
years last month.