Trading in America has been sinking slowly and dragging the S&P 500 Index down with it, to the lowest level in almost two months. Bonds and commodities futures collapsed, while the storm clouds of a possible impending US default are gathering. The US dollar, however, appreciated.

Surprisingly, the US dollar is finding opportunities for growth even under the threat of a default. All of the problems surrounding the dollar and American bonds are only pushing it up. One can only imagine the euphoria with which enthusiastic investors will scramble to buy American bonds when the long-awaited news is finally announced.

The S&P 500 Index went down 2% for the first time since June 1, falling to 1,304.89 points as of 4PM in New York. The cost of hedging against a default on US bonds went up to the highest rate since February 2010, while yields on 10-year treasury obligations increased two basis points to 2.98%. Coffee and oil futures lost over 1.5%, while gold lost its earlier gains to pull the S&P GSCI down 0.9%; the dollar index increased by 0.9%.

Deep Trust Trading analysts are observing that the disagreement between democrats and republicans over plans to reduce the US budget deficit is distracting investors from recent company profit reports, which are showing higher than expected results for 81% of the companies currently represented in the S&P 500 Index. Industrial company stocks led sales today after a US Department of Commerce report showed a 2.1% drop in durable goods orders.

€This is a real tug of war between the risk of a default and the current headlines in the news and in profit reports,€ said Matthew Di Filippo, Director of Research at Stewart Capital Advisors LLC, and who manages a portfolio of $1 billion. €The volatility may create opportunities for purchases, considering that corporate profits are very high.€

The Fed's €Beige Book,€ which is traditionally published two weeks in advance of each Federal Open Market Committee meeting, states that €economic activity is continuing to grow€¦although the pace is slowing in many states.€ The growth has stalled in eight out of twelve states represented in the Fed, compared with only four in the Fed's last research, the Book concludes.

The unified European currency depreciated against the dollar by 1% to $1.4373, losing all of its gains from the past two days. The Euro went down against the yen by 0.8% and against the Swiss franc by 0.9%. The Australian dollar strengthened by 1.1% against the American currency to $1.1081, its highest level since it was introduced into free circulation in 1983. Bulls have confidence in the Aussie based on a report on inflation which showed consumer price growth in the second quarter that was higher than economists had predicted. The New Zealand dollar also rose against the US currency after a survey showed improvement in business confidence in June. It is also at its highest level against the US dollar since it was put into free circulation in 1985.

Today, Deep Trust Trading analysts await publication of data on unemployment applications; first-time applications for the week up to July 23 are expected to be around 415,000.

Deep Trust Trading Analytical Department