September 25 - The Nasdaq made new highs for the move today, although cautiously so, while the Dow and S&P hit new record highs before pulling back. The VIX slipped lower to trade near 15 this morning, while the dollar index firmed to trade near 100.6. Yields on 10-year Treasuries are trading near 3.78%, while yields on 2-year Treasuries are trading near 3.55%. Crude oil prices are trading nearly 1% lower at midday, while the grain and oilseed markets largely erased overnight losses to firm into the green during the morning trading session. The grain and oilseed markets continue to find underlying support from fund short-covering as longer-term inflation expectations slowly begin to rise following the Federal Reserve's aggressive rate cut last week, while that strength is being met by increased farmer selling amid this year's large domestic harvests that must be moved. Traders are also monitoring the delay in the monsoon rains for key production areas of Center-West Brazil.
Fighting continues to escalate between Israel and Iran-backed Hezbollah in Lebanon, displacing an estimated half million Lebanese cititizens to this point. Israel broadened its airstrikes in Lebanon today, targeting key Hezbollah strategic locations, while Hezbollah reportedly sent a ballistic missile into central Israel targeting Mossad headquarters, which Israel says that it shot down before it reached its intended target. While it has not taken credit for the attack, Hezbollah blames Mossad for carrying out an attack last week via booby-trapping thousands of pagers and radios used by Hezbollah members that exploded simultaneously, killing 30 people and wounding nearly 3,000 more. The fear is that this war will eventually pull Iran and other Middle Eastern countries into it, impacting energy production and shipping infrastructure, in addition to the obvious human toll. Israel's military stated today that it is calling up two additional reserve brigades to the northern border to carry out operational activities, with some observers speculating that a ground invasion is possible.
New home sales fell to a seasonally adjusted annual rate of 716K in August, exceeding analyst expectations of 700K, although down from the previous month as expected. The July number was revised upward to 751K home sales, versus the 739K originally reported. The range of expectations for this report was very wide, stretching from 650K to 744K units. The median sales price of homes sold was $420,600, while the average sales price was $492,700. The seasonally adjusted inventory of homes on the market totaled 467K, which represents a 7.8 month supply. Other data released today from the survey of business uncertainty revealed that surveyed firms expect sales growth to rise by 3.87% over the coming 12 months, matching expectations in last month's survey. However, employment growth expectations slipped to 4.11% growth over the coming year, down from 4.42% in the August survey.
U.S. commercial crude oil inventories (excluding the Strategic Petroleum Reserve) dropped by 4.5 million to 413.0 million barrels in the week ending September 20, putting them roughly 5% below the five-year average for this week of the year. Gasoline stocks fell by 1.5 million barrels, leaving them 1% below seasonal levels. Distillate stocks decreased by 2.2 million barrels, putting them 9% below levels typically seen in mid-September. Ethanol stocks slipped to 23.5 million barrels last week as processors shut down for seasonal maintenance time, down from 23.8 million barrels the previous week, but still above the 20.0 million barrels on hand a year ago. Ethanol production dropped to 994K barrels per day in the week ending September 20 as processors do maintenance ahead of the arrival of the new corn crop, down from 1,049K bpd the previous week, and down from 1,009K bpd the previous year. The production of ethanol utilized an estimated 97.6 million bushels of corn last week, as shown below, down from 103.0 million the previous week, and down from 100.4 million bushels in the same week last year. That brings estimated corn use for ethanol in the first 20 days of the corn marketing year to 292 million bushels, down 24 million bushels or 7.6% from the same period last year.
