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Perspective: Mid-Day Commentary for July 18

By: Arlan Suderman, Chief Commodities Economist

Perspective: Midday Commentary
 
Guest Commentary by Mike Castle
Market Intelligence - Fertilizer Analyst

 

July 18 - Stocks are continuing their rally this morning, bolstered by better than expected earnings from major companies such as Goldman Sachs. The VIX is trading below 25, while the U.S. dollar is down roughly 1% to trade near 107. Yields on 10-year treasuries are up slightly, trading just above 3%. Commodities are surging, with crude oil pushing back above $100 following Biden's trip to the Middle East, while the ags are up sharply as well.

 

Equities are also benefitting from expectations of a less aggressive rate hike by the Fed at their July meeting. Traders now expect a second-consecutive 75 basis point hike in July, not the 100 point hike initially feared following last week's surprise inflation surge. This is still a huge jump in rates relative to recent history, but market participants recognize the necessity of taming runaway inflation in the current environment.

 

Today's reading of the U.S. homebuilder sentiment gauge fell to its lowest level since May 2020 as homebuilder confidence continues to fall amidst rapidly-rising rates and lagging supply chain bottlenecks. The National Association of Home Builders/Wells Fargo Housing Market Index came in at only 55, a sharp drop from 67 the month prior and representing the seventh-consecutive month-on-month decline from December 2021's relative peak of 84. If the initial COVID shock readings from April/May 2020 are excluded, this is the lowest reading for the gauge since May 2015, reflecting the widespread fear being felt in the housing market. More housing data is coming this week, however, with U.S. housing starts and existing home sales due to be released Tuesday and Wednesday, respectively.

 

Russian President Putin will be traveling to Iran this week to meet with Turkish President Erdogan to further discuss the re-opening of the Black Sea to Ukrainian grain exports with expectations for an agreement to be signed in the days ahead. Further details need to be worked out and the deal now reportedly depends heavily on receiving Putin's approval. All sides will also be discussing their involvement in the ongoing war in Syria, where Russia & Iran back an opposing side to Turkey. This is only Putin's second trip abroad since launching his invasion of Ukraine in February as he continues to grow his nation's ties with Iran, who is experienced in operating under heavy Western sanctions.

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