Friday, May 22, 2009

Market Reflections 5/21/2009

Warnings that the UK may lose its AAA rating raised questions over the risks of government stimulus and the effects of the recession -- not only in the UK but also here in the United States. Money fled offshore in a rare triple flop: stocks down, Treasuries down, and the dollar down. Jobless claims didn't boost any optimism showing little if any improvement in the labor market.

The bad news pushed the S&P 500 down 1.7 percent to 888.34, but funds didn't move into Treasuries where yields instead moved higher, up a very sharp 18 basis points on the 10-year to 3.37 percent. The dollar confirmed the exodus, falling 0.8 percent to 80.57 at day's end for the dollar index. The decline in the dollar, and with it the associated risk of inflation, gave a boost to commodities including oil, firmly above $60, and copper, firmly above $2. The bad news gave gold a boost, which at a hefty $954 is getting a boost from worries that economic conditions may not be on the mend after all.

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