Credit Worries Send Bonds Higher
U.S. 10-year Treasury bond prices kept rising today, despite Federal Reserve
efforts to offset a credit crunch, by loaning $38 billion to the U.S. banking
system over the past few days. Traders and investors are extremely worried that
continued mortgage lending blowups could lead to a major market and economic
fiasco. News and rumors of major quantitative funds keep hitting media outlets,
fueling panic and volatility in the world’s equity markets. Fed fund futures are
pricing in a 100% chance of a rate cut by September, while some traders are even
calling for an unplanned emergency cut.
The dollar fell today, as the spreading subprime mortgage crisis continued to
threaten global economic and market stability. The central banks of three major
currencies, the U.S. Fed, ECB and BoJ, have all pumped cash into the money
markets in an effort to stabilize the market and to calm investors scared of
more credit crises. After a volatile early session, the currency market majors
are mostly flat, with the negative overall bias focused on a weakening dollar. The dollar fell
moderate against the Canadian dollar and slightly against
the British pound.
Crude oil prices were flat today, recovering some early morning losses. Crude
has been falling lately, on fears that slowing U.S. growth will lead to less
energy demand and use. Natural gas futures were up 4% today on hurricane
Gold futures rose 1.3% as traders looked for a safe-haven from subprime
mortgage fallout. Gold fell yesterday as traders sold gold to cover other
assets, but today gold was gaining on general consensus that more safety is
necessary in this volatile market. Copper futures fell fractionally today, on
concern that economic weakness will lead to slowing demand for the metal.
Grains were mixed. Soybeans fell about 0.6% and corn rose fractionally.
The Dow rallied back in late day trading after being down nearly 120
points. IBM and ExxonMobil led the Dow rally posting gains of 1.6% and 1.2%
here to read the rest of today’s Stock Market Recap.