Bonds Rebound Despite Bernanke Comments

U.S. Treasury bonds snapped back today, after falling yesterday on expectations of a Fed rate cut at the end of the month. Bonds are trading just off 3-year record highs, on negative economic pressures stemming mostly from the housing and credit sectors. Bonds typically rally on economic weakness and fall on strength, so it's clear that traders did not fully support yesterday's Bernanke rally.

The yen rallied versus the euro and the dollar, as global equity markets took a hit today. The so-called carry trade has been the dominating factor in yen movement in the last 6 months, as traders buy and sell yen on perceived equity risks. Traders buy yen on equity weakness and sell on strength, leading to a close relationship between yen movement and global equity strength. The euro was down slightly on the dollar. Most of today's action revolved around yen strength.

Crude oil futures fell 1% today, as traders continue selling oil on perceived global economic weakness. Traders are concerned that a global economic slowdown would result in substantial declines in energy demand. Crude just last week hit all-time record highs of $100 a barrel on general demand worries. Clearly, traders feel that weakness in the economy would equate to a slowdown of energy use, as oil has dipped in the past months on similar expectations. Natural gas was down fractionally today.

Gold futures notched new record highs today on dollar weakness. Gold normally trades inversely to the dollar and with crude oil, and today, traders focused on dollar weakness and bought gold as a safety. Traders normally buy gold as a safety against economic uncertainty as well, which also has been contributing to the record gold prices. Copper futures rallied today on similar inflation-safety concerns.

Stocks erased yesterday's gains as gloomy outlook's from American Express, and a number of retailers, increased concerns the U.S. economy will slip into recession. Click here to read the rest of today's Stock Market Recap.