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Perspective: Morning Commentary for June 27

By: Arlan Suderman, Chief Commodities Economist

Perspective: Morning Commentary
 
Matt Zeller
Senior Market Intelligence Analyst
Matt.Zeller@stonex.com

June 27 – The Dow Jones Industrials picked up steam into the end of last week and look to extend that rebound this morning, despite overall concerns remaining on rising inflation and interest rates, recession risk, and continued geopolitical problems. Even with some momentum as of late, Wall Street is almost ready to put a bow on its worst first half of the year in multiple decades. Portfolio rebalancing is likely to provide a boost for that very reason this week, as investors end the month, quarter, and half…

 

Durable goods orders showed a strong 0.7% increase for the month of May, up from 0.4% in April (revised a tick lower) and well above trade expectations for just a 0.1% gain. That forecast was range was varied at -1.3% to +1.8%, however. New orders excluding transportation and defense supplies rose 0.7% and 0.6%, respectively, following 0.2% gains for each the previous month. “Durable goods orders” are those placed with U.S. factories for items meant to last at least three years, and continued investment there is a solid sign in the face of rising inflation and interest rates, and concerns about the ultimate fate of the U.S. economy. Pending Home Sales are up later this morning and that could be the riskier economic reading today, based on some shaky housing market numbers as of late. Sales for May are seen falling 4.0% from April, basically even to April’s decline.

 

WTI crude oil recovered into the end of the week last week and is favoring the high side again this morning; just like the grain markets, oil traders are waiting for news on Thursday when OPEC+ meets and discusses sticking to their plan for accelerated crude production. In the meantime, G7 leaders are gathering the Bavarian Alps to mostly discuss policies in sanctions against Russia; Ukrainian President Zelenskyy joined the meeting virtually today and world leaders pledged support. The U.S. is mulling over a price cap on Russian oil and will send new weapons and missile defense systems to Ukraine, though Russian missiles continued to hit Kyiv as the G7 summit went on.

 

The grain markets started off weak last night but have recovered since, with the exception of corn which is being weighed down by excellent weekend rains in the heart of the corn belt northward. Chances look lighter this week with temps moving back higher going forward, but those key 6-10 day forecasts continue to run wet at this point, keeping that carrot hanging out there for the bears into early July. On the fundamental side, the trade will look forward to the June 30th USDA acreage and stocks reports on Thursday morning, a set of reports that often provides some fireworks to the market ahead of the long holiday weekend. A bullish report across the board sent the markets skyrocketing last year when acreage gains failed to materialize; little change is expected this year with around half a million acres seen shifting from soybeans to corn. The Midwest planting season was slow to start but better late conditions and massive price incentives were seen driving farmers to plant corn until the very last day. It would still be the lowest June corn acreage figure since 2018, and the highest soybean acreage on record (for either the June acreage report or an overall final number, if realized).

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