Housing Numbers Highlight U.S. Weakness

U.S. 10-year Treasury bond prices rallied today, after the U.S. released
disappointing new-home sales numbers today. U.S. sales of new homes fell to
12-year lows in November, prompting investors to buy into the safety of the
long-term government debt. Bonds typically rally on economic weakness and fall
on strength, so it’s clear that traders have positioned themselves defensively
heading into the new year.

The dollar fell against the euro and the dollar today, after the U.S.
released a housing report that showed new home sales fell to a 12-year low last
month. The terrible housing news drove the dollar closer to recent record lows
versus the euro. The dollar had a rough year versus the euro, falling
dramatically on credit, housing and economic growth concerns. The euro was down
slightly versus the yen, but most of the action today surrounded U.S. negative

Crude oil futures fell about 0.6%, giving up morning gains on basically no
news. Crude rallied through the morning on a continuation move following
yesterday’s rally on falling inventories, but suddenly reversed mid-day and
closed lower. Traders could find no real reason for the drop in prices. Natural
gas prices rallied over 2% today.

Gold futures rallied over 1% today on dollar weakness and rising oil prices.
Gold normally trades inversely to the dollar and with crude oil, and today,
traders focused on dollar weakness and high energy prices, and bought gold as a
safety against those factors. Copper futures dropped about 1.5%.

Grains were lower today. Soybeans fell nearly 4%, while corn dropped about

Economic News

U.S. new home sales fell to 12-year lows
in November.