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Perspective: Morning Commentary for August 6

By: Mike Castle, Market Intelligence - Fertilizer Analyst

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Guest Commentary by Mike Castle

Senior Commodities Economist

August 6 – This morning’s stronger-than-expected U.S. labor data offered markets some relief, reinforcing confidence in the economy while giving the Fed greater flexibility to raise rates should inflationary pressures reaccelerate in next week’s July data. Stock futures are pointing to a mixed open to start the day, with the tech-heavy Nasdaq showing the most weakness. The VIX has fallen notably from yesterday’s spike above 18.4 as it starts the day hovering just below the 16-mark. The dollar is quietly higher as it trades just above 99.8, holding in the tight range seen thus far this week as traders continue to digest data to shape expectations for the Fed’s next move, which we’ll dive into in more depth below. Long-term treasury yields have relaxed slightly from their recent spike, with 30-year yields starting the day trading just above 5.19%, while 10-year yields trade above 4.64%, and 2-year yields sit below 4.22%. Crude oil is modestly higher to start the session after sharp declines earlier in the week, with nearby WTI up 1.8% to trade at $76.40 and nearby Brent up 2.4% to trade at $81.40. Meanwhile, the ags are quietly mixed to start the day.

Several FOMC members delivered hawkish comments at various speaking events yesterday, including Fed Governor Lisa Cook, Minneapolis Fed President Neel Kashkari, and San Francisco Fed President Mary Daly. Kashkari argued that monetary policy did not appear meaningfully restrictive enough to return inflation to 2.0%, reiterating his belief that it is time to begin slowly moving rates higher. This is no surprise to the market, given him being one of the three dissenters favoring a 25-basis point hike at last month’s meeting. What the market is paying more attention to, however, is the notably hawkish shift from Lisa Cook, who voted to hold in July. In her comments, her stance was that inflation risks outweigh employment risks, indicating she would be prepared to raise rates if disinflation did not resume soon. Obviously, the rosy June inflation data allowed for a brief reprieve, but the real question is how the resumed escalations in the Middle East and subsequent rebound in energy prices drove inflation in July, as well as what’s to come in the months ahead.

Given the 9-3 vote at the July meeting, traders will be closely scrutinizing available comments from FOMC members ahead of the September meeting, particularly looking for suggestions of a hawkish shift from each of the nine who voted to hold steady in July in order to shape expectations for the Fed’s next move. CME’s FedWatch tool reflects market expectations of a 25-basis point hike at the September meeting, as shown in the graphic below, though it is worth noting that these odds have fallen slightly from their recent peak above 67%. Looking ahead to the remainder of 2026, the market is now showing the highest odds of only one 25-basis point hike by year’s end, with two hikes following. This is a reverse in course from the lead up to the Fed’s July meeting, with increasingly hawkish expectations being priced in. As we’ve noted for months, markets will need time to adjust to the Fed’s new leadership and less guidance about the future policy path. That transition will intrinsically bring more uncertainty on the front-end, and potentially across the broader yield curve, until investors develop a clearer understanding of the Fed’s new “normal.”

U.S. based employers announced 33.4k job cuts in July, falling notably from the 45.8k seen in June and marking the lowest reading in exactly two years. This is also a notable drop from the reacceleration seen through the spring, reaching as high as 97k just two months ago. Once again, the tech sector saw the largest number of job cuts at 9.9k, followed by financial services (3.2k), and government (3.0k). Cumulatively through the first seven months of 2026, U.S. employers have announced cuts of 477.0k jobs, down 40.8% from the January through July period last year, with the tech sector accounting for roughly one-third of the total. After a weaker than expected JOLTs report earlier this week, this is a renewed sign of an impressively resilient U.S. labor market, helping offset some of the concern regarding the hawkish shift in rate expectations outlined above.

First-time claims for unemployment benefits came in at 199k in the week ended August 1st, slightly below the expected 202k and effectively in line with the upwardly revised 198k seen in the week prior. This is now the first time we’ve seen a three-week stretch of sub-200k initial jobless claims in at least the last decade, pushing the four-week moving average for initial jobless claims down to 198.75k, the lowest level seen since early October 2022. Continuing claims did rise, however, coming in at 1.801M, above the average estimate of 1.790M. The week prior was revised down to 1.777M from the initially reported 1.782M, providing some offsetting pressure. This again points to a more resilient than expected U.S. labor market, a welcomed development as this resilience would help give the Fed more leeway to raise rates if inflationary pressures show a resumption in next week’s data.

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Perspective: Morning Commentary for August 6

August 6 – This morning’s stronger-than-expected U.S. labor data offered markets some relief, reinforcing confidence in the economy while giving the Fed greater flexibility to raise rates should inflationary pressures reaccelerate in next week’s July data. Stock futures are pointing to a mixed open to start the day, with the tech-heavy Nasdaq showing the most weakness. The VIX has fallen notably from yesterday’s spike above 18.4 as it starts the day hovering just below the 16-mark. The dollar is quietly higher as it trades just above 99.8, holding in the tight range seen thus far this week as traders continue to digest data to shape expectations for the Fed’s next move, which we’ll dive into in more depth below. Long-term treasury yields have relaxed slightly from their recent spike, with 30-year yields starting the day trading just above 5.19%, while 10-year yields trade above 4.64%, and 2-year yields sit below 4.22%. Crude oil is modestly higher to start the session after sharp declines earlier in the week, with nearby WTI up 1.8% to trade at $76.40 and nearby Brent up 2.4% to trade at $81.40. Meanwhile, the ags are quietly mixed to start the day.

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Perspective: Mid-Day Commentary for August 4

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