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Perspective: Mid-Day Commentary for May 30

By: Arlan Suderman, Chief Commodities Economist

Perspective: Mid-Day Commentary
 
Arlan Suderman
Chief Commodities Economist

Guest Commentary by Matt Zeller, Senior Market Intelligence Analyst

May 30 – The Dow Jones is down almost 400 points as of the time of this writing, looking to make today the third straight losing session this week and the sixth in the last eight trading days after closing above the 40k mark on May 17. Salesforce shares continue to drag on the benchmark index due to their earnings miss. The major indices are still on track to wind up with winning months at the bell tomorrow, but all eyes will be on Personal Income and Spending releases tomorrow morning; the PCE Indices are expected to show inflation still in the 2.7-2.8% range, still above the 2% area the Federal Reserve is looking for before projecting any future rate cuts.  

Pending U.S. Home Sales fell 7.7% from March to April, well below the average -1.0% trade expectation (and below the entire trade estimate range), and taking the index from the National Association of Realtors to a 72.3 reading – the lowest in four years. The 7.7% month-over-month decline was the worst since February 2021. Contract signings for home purchases fell in all regions of the U.S., with the Midwest showing the largest decline at -9.5% in April. Increased home prices in the months of February and March coupled with interest rates peaking around 7% has prospective home buyers reluctant to move and give up their lower-rate mortgages.

WTI crude oil continues to trade slightly lower on the session following the weekly DOE Report release, following up on a bearish reversal from highs (and the $80/bbl mark) yesterday; that’s despite a surprise 4.2 million-barrel crude draw from DOE, compared to trade expectations for a less than one mln bbl decline. Gasoline and distillates posted two-million-plus builds this week, compared to estimates for around one mln bbl draws as well. Demand prospects remain shaky for the summer due to elevated interest rates and a potential economic slowdown. OPEC+ will meet this weekend to decide what to do with current supply cuts for the rest of the year.

The wheat market has driven the grain complex as of late, holding the most compelling fundamental story at this point due to foreign production concerns, and with the trade content with the progress of the U.S. corn and soybean crops. The spot July Chicago wheat contract finally closed a single tick above the $7 per bushel mark on Tuesday but has dragged the grains lower since. Black Sea rain forecasts are at least trending a bit wetter over the next ten days, though opinions are split on what kind of dent they will make in the region’s drought.

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