Bonds Up on Weak Data, Bernanke

U.S. 10-year Treasury bonds rose today, after Fed Chief Bernanke said that
inflation will probably recede and that housing weakness might spread to slow
other areas of the economy. Bonds fell through May and June before bouncing off
of 11-month lows on extended price levels and general worries about the subprime
mortgage problems. With Bernanke’s somewhat pessimistic comments out today, more
and more traders are betting that the U.S. growth could slow dramatically soon.

The dollar fell against the euro and the yen today, after Fed Chief Bernanke
warned that a home construction slump could lead to slowing growth in the U.S.
The subprime mortgage collapse has led many traders to speculate that the U.S.
is about to enter a period of major slowing growth, and the current housing
problems are also weighing on the market. Even despite a positive consumer
prices index report, the dollar fell on overall negative sentiments, fueled
further by Bernanke’s comments. The euro fell against the yen. The dollar was
flat against the Canadian dollar, and continued to fall against the British

Crude oil futures rose about 1% today, after the energy inventory report
showed an unexpected drop in gasoline inventories today. Oil fell yesterday on
speculation that today’s report would show an increase in reserves, due to the
increased refinery capacity across the country. Most analysts were looking for
an 850k gain, but supplies actually dropped by more than 2 million barrels.
Natural gas futures were up nearly 3% on weather forecasts for a heat wave
across the U.S.

Gold futures rose over 1% as the dollar fell against the euro. Gold usually
trades inversely to the dollar and with oil; today, traders bought gold and sold
the dollar. Lately, high interest rates have also been helping to keep gold
prices lower, as high interest rates create an attractive investment for safety.
Copper futures rose fractionally amid some mine worker protests in South

Grains jumped today after a major slide over the past two days. Soybeans
gained nearly 2% and corn rose 1.4%.

The major indices pulled back on subprime
worries, missed earnings reports, and higher crude prices. The Nasdaq led to the
downside giving up 0.5% after tech bellwether Yahoo cut its earnings forecast
for the year and

reported lower profit margins.

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Consumer prices rose 0.2%, the smallest gain
in 5 months.

John Lee

Associate Editor

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