US Data Sends Bond Prices Lower

U.S. 10-year Treasury bond prices fell today, after the U.S. reported that producer prices rose the most in 34 years last month, and retail sales increased more than expected. Both of these reports point to growing inflation, putting the Fed directly between a rock and a hard place. The Fed wants to cut rates to keep growth going, but inflation will force the Fed to abandon the rate cut cycle. Bonds typically rally on economic weakness and fall on strength, so it's clear that traders have positioned themselves defensively into year-end.

The majors were mixed today, as traders continue to digest a number of key economic reports and major announcements from the week. Today, economic reports from the U.S. pointed to inflationary pressures, which sent the dollar higher versus the euro. Equity weakness across the globe also boosted the yen, which rose as traders covered risky positions which were opened with borrowed yen. In the so-called carry trade, the yen rallies on equity weakness, and falls on strength. The yen has reacted positively so far to the Fed rate cut from earlier in the week.

Crude oil futures sank by more than 2% today, on speculation that global central bank action and cooperation will not be enough to stem major economic losses. Traders are concerned that a slowdown in the U.S. and global economies would equate to a major drop in demand for energy. Crude fell off record highs in the last month as traders began betting that an upcoming economic slowdown would effect oil demand levels negatively. Natural gas futures fell nearly 3%.

Gold futures fell 2% today, in line with falling oil prices. Gold normally trades inversely to the dollar and with crude oil; today, gold traders focused on plummeting oil prices, and sold gold on that account. Copper futures fell about 2.5%.

Grains were mixed today. Soybeans fell about 0.4%, while corn rallied 0.5%.

An afternoon surge took the Dow and S&P 500 into positive territory, but left the Nasdaq slightly lower. Earlier in the day, positive retail sales and jobless claims data, was offset by the largest jump in producer prices in 34 years. Click here to read the rest of today's Stock Market Recap.