Bonds Take a Breather

U.S. 10-year Treasury bonds rose slightly today. Bonds have been staging a
firece rally since mid-July, on concern that subprime and credit problems will
spread to other areas of the economy and cause slowing growth. Last Friday, the
Fed cut its discount lending rate by 1/2 a percentage point, helping to boost
the equity markets, and bond prices have only risen since. Bonds typically rise
on economic weakness and fall on strength, so it’s safe to say that recent
market activity has led to mostly negative economic speculation.

The yen tanked today against the dollar and the euro, after the BoJ kept
interest rates at the lowest levels of the major economies of the world. With
interest rates low and with no hike in sight, traders fully resumed the carry
trade, borrowing yen to invest in riskier, more profitable assets. In the past
few weeks, the yen has gained on global equity weakness, and fell on strength,
as traders enter and exit the carry trade based on global conditions. The euro
was up slightly against the dollar. The dollar fell against the Canadian dollar and the British pound.

Crude rose fractionally today. Crude has been falling lately, on widespread
concern that slowing economic growth could lead to a decline in energy demand.
The credit crunch has affected oil prices by driving them lower on widespread
economic worries. Crude prices have fallen over 10% since the beginning of
August, when the slide began. Crude oil fell about 0.6% after a government
report of comfortable inventories.

Gold was flat today. Gold normally trades inversely to the dollar and with
oil; today, despite dollar losses versus the euro, gold managed to stay
near-even. Gold fell sharply last week on concerns that economic growth problems
would lead to slowing gold demand, but gold prices have since inched steadily
higher. Copper futures rose nearly 2% on rising global demand.

Grains were mixed today. Soybeans gained 1.3%, and corn fell 0.5%.

The major averages began the day in positive territory but shortly thereafter
moved below the unchanged line. A rally took place shortly after 1:30 P.M. that
brought the Dow briefly above the unchanged line. But downward pressure once
again infiltrated stocks, as lingering fears within the credit market continue
to plague investors.

Click here
to read the rest of today’s

Stock Market Recap

Economic News

Initial jobless claims fell last week, in
accordance with expectations.

Sign me up for a no obligation, 7-day Free Trial of PowerRatings (for Traders)