Bonds Slip from Extended Conditions

U.S. 10-year Treasury bonds fell today, as traders bet that the rally was overextended after a nearly month-long rally. Bonds have rallied recently on concern that credit problems will spread to other areas of the economy and cause an economic slowdown. Traders bought bonds as a safety in the face of future U.S. economic weakness. Bonds typically rise on weakness and fall on strength.

The yen fell today against the dollar and the euro, as traders resumed the carry trade, and stocks rallied around the world. The yen has been gaining on any major market worries lately, as traders buy back borrowed yen, to cover riskier assets. And then as global equities rebound and sentiment becomes positive, traders borrow back the yen, and get back into riskier positions. The euro also rose against the dollar today, resuming the major trend. The dollar fell against the Canadian dollar and the British pound.

Crude oil futures fell about 0.7% to 8-week lows today, after the Energy Department reported that crude stockpiles rose by 1.89 million barrels, versus expectations of a nearly 3 million barrel loss. Crude has also been sinking lately, on fears that economic weakness in the U.S. will lead to a slowdown in growth, and therefore less energy demand. Natural gas futures fell over 4% to 11-month lows.

Gold futures rose about 0.4% on speculation that the dollar will weaken against the euro. Gold normally trades inversely to the dollar and with oil; today's gold action was dominated by dollar selling versus the euro. Copper futures rose nearly 2% on growing Chinese demand.

Grains rose today. Soybeans gained nearly 2%, and corn rose 2.5%.

Bulls controlled the market on Wednesday, as merger and acquisition news fuels the upward movement. Investors are also focusing on the Federal Reserve, as more and more investors are beginning to believe that the Fed will cut interest rates in the near future. Click here to read the rest of today's Stock Market Recap.

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