Falling Oil And Inflation Spurs Bond And Stock Index Rally

Lower oil prices and benign Producer Price Index (PPI) data temporarily alleviated fears about inflation and sparked a rally in T-bonds [USH0>USH0] that left the March contract 23/32 higher at 94 21/32. The rally in bonds helped equities extend a runaway drive to record territory and left stock indexes with solid gains on the day.

From the Momentum-5 List, NASDAQ 100 futures [NDH0>NDH0] rallied 45.50 to 3257.00. Registering on the Pullback Off Highs List, Dow futures [DJH0>DJH0] climbed 85.0 to 11372.0 and the S&Ps futures [SPH0>SPH0] gained 5.60 to end at 1434.80.

Another Pullback From Highs candidate, March dollar index futures [DXH0>DXH0], surged along with American equities, gaining .71 to 101.31. The Japanese yen [JYH0>JYH0] was little changed while Swiss francs [SFH0>SFH0] and British pounds [BPH0>BPH0] fell .0057 and .0038, respectively.

January crude [CLF0>CLF0] fell .95 to 25.20 as the United Nations voted to approve the resumption of Iraq’s oil-for-food deal. Unleaded gas [HUF0>HUF0] fell even more (on a percentage basis), losing .0312 to .6840 and heating oil [HOF0>HOF0] lost .0170 to close at .6330.

The metals were quiet with copper [HGH0>HGH0] drifting down .80 to 79.60.

The grains also took the day off after Thursday’s large move in the soybean complex. January soybeans [SF0>SF0] added 1 1/2 to 461 and soymeal [SMF0>SMF0] recouped 1.2 of Thursday’s loss to close at 146.2.

In the meats, cattle sold off despite strong fundamentals. January feeder cattle [FCF0>FCF0] fell .850 to a 20-day low of 84.275 and live cattle [LCF>LCF0] dipped .950 to 68.625. February pork bellies [PBG0>PBG0] tumbled 2.725 to 76.175 and February lean hogs [LHG0>LHG0] slipped 1.625 to 55.400.

In the softs, coffee [KCH0>KCH0] regained 4.75, turning around a three-day loss to close at 127.00.