Markets Mostly Flat on Rate Cut Expectations

U.S. 10-year Treasury bond prices gave up moderate gains today to close near
the flat line. Bonds opened up higher, but fell through the day, on positive
sentiments from the day’s retail sales numbers. Also in play were expectations
that the Fed will cut rates next week; Fed futures are pricing in a 100% chance
that the Fed will cut rates by at least 25 base points. Bonds have been rising
steadily since June, when the credit crisis unraveled. After hitting new highs
on widespread economic concerns last week, bonds are taking a breather ahead of
the key Fed announcement.

The major currencies were mixed and mostly flat today, after a negative
retail sales number from the U.S. The euro slipped on the dollar, while the yen
was up slightly against both the dollar and the euro. Yen strength could be
attributed to some equity weakness, but mostly, it was a rest day for the
currencies after a volatile week. The dollar has been under major pressure in
the last weeks ahead of the Fed meeting; with an almost guaranteed rate cut on
the way, many traders are taking positions against the dollar on overall slowing
growth and credit exposure. The dollar fell to new record lows against the euro
this week, but rose versus the yen. Today, however, the dollar was up slightly
on the yen on speculation that the Fed will definitely cut ruts next week.

Crude oil futures rose fractionally today after opening lower, and extended
to new record highs today. Crude fell more than 10% in August, only to make back
those gains on supply worries. Traders are concerned that current global
production and reserve levels will not be able to handle Q4 demand, which is
expected to increase. Natural gas rose about 1% today.

Gold futures were basically flat today, as currencies took a break from a
volatile week. Gold normally trades inversely to the dollar and with oil, and
today, gold relaxed with the dollar. Copper fell fractionally.

Grains were down today. Soybeans were down slightly, and corn fell about

Stocks rallied at the close today to close just fractionally higher.
Industrial production numbers and retail sales came in disappointingly low
today, keeping a lid on any major gains. Traders are anxiously waiting on next
week’s Fed meeting for more information. Click

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Stock Market Recap

Economic News

Retail sales and industrial production
both fell unexpectedly in the U.S. during August.