Perspective: Morning Commentary for March 3

By: Arlan Suderman, Chief Commodities Economist

Thu, 03 Mar 2022, 12:25

Perspective: Morning Commentary

Arlan Suderman

Chief Commodities Economist

March 3 – Wall Street tried its hand at multi-tasking this week as traders focus on both the Ukrainian war and on the Federal Reserve’s attempts to tame inflation. Unfortunately, the two issues are closely tied together now as energy prices soar due to the war. Nonetheless, the combination provides times of market swings as traders digest their understanding of how the two issues will meld together. The VIX is trading near 31 this morning, while the dollar index is trading near 97.6, and yields on 10-year Treasuries are trading near 1.85%. Crude oil pries are more than 1% higher after setting new highs overnight, while wheat continues to lead the Ag sector higher as well due to fears of global commodity shortages due to the war in Ukraine. End user anxiety is growing.

Multiple explosions rocked Kyiv overnight as Russian forces slowly advance on the city. Those advances have been much slower than Russia anticipated due to the stiff resistance of the Ukrainian people. Yet, Russia has the greater force. There continues to be talk of negotiations, but those negotiations tend to go nowhere. Russian President Putin appears determined to do maximum damage to Ukraine, unleashing the full power and force of his military. Ukraine is determined to fight to the end. Sanctions keep driving Russia’s economy deeper into a hole, but it has done little to deter Putin to this point. Regardless of the outcome, we will likely see the Russian economy slide into a deep recession for some years as a result of the sanctions applied against Russia for the actions it has taken. The methods that Putin used to mount his attack on Ukraine will make it difficult politically for nations to justify removing those sanctions for some time after this is over.

Commodity prices continue to rise on the fear that the above will result in shortages on the world market that may last deep into this year, and possibly into the next. A quarter of the world’s grain is produced in this region, along with similar portions of fertilizer, while Russia is also the third largest producer of crude oil. The markets initially thought these supplies might be removed from the world market for the days it took for Putin to topple Ukraine. Now it is apparent that this conflict may become very long and drawn out. Furthermore, the sanctions will likely linger much longer, with the affects of the war hampering Ukraine’s ability to produce a crop in 2022. This shortfall in production in 2022 comes on top of production fears already in place due to fertilizer shortages, which are only made worse by this conflict. That’s not to mention the ongoing weather risks in South America, with rising risks in the United States and parts of Europe as well. That doesn’t mean that we’re going to run out of grain this year, but global markets are doing what they can to ration demand on the possibility that we could run out.

Traders will again be monitoring Federal Reserve Chair Jerome Powell’s comments today as he testifies before the Senate Banking Committee. His prepared comments should be very similar to those he delivered to the House Finance Committee yesterday, which Wall Street tended to like. It was clear from his comments that the Fed has a laser focus on taming inflation, although the details of the plan still need to be ironed out. Powell seems to favor a 25-basis point rate hike in two weeks when the Fed meets, but he left the door open to a 50-basis point hike if needed. His comments suggested that the Fed is not worried about high energy prices driving the economy into a recession, considering the tremendous amount of stimulus that is still in the economy. Instead, the Fed is steadfastly focused on bringing inflation under control. The other key question that Fed members are expected to address in two weeks is a schedule for starting to shrink the Fed’s balance sheet – removing a portion of the stimulus that’s currently in the economy. That would provide a more natural method for raising interest rates, with the primary focus likely on the mortgage-backed securities focused on the long end of the yield curve.

China’s economy is barely growing according to data released this week. That apparently has Chinese authorities considering a major shift in their policy regarding Covid-19. Rumors began circulating this week that it may be working on a path toward moving away from its zero-tolerance policy toward Covid that includes numerous lockdowns and restrictions that are strangling its economy. That won’t be easy though, because China’s vaccine’s are less effective even than those in the West, and its healthcare system is less developed over much of the country. It’s zero-tolerance policy to this point means that much of its population lacks the natural immunity of exposure that would help it deal with rapidly spreading variants. This will be a major challenge for China. It’s ability, or lack thereof, to transition its economy to one that can manage Covid rather than eliminate it will be key to its ability to compete as a major power in the world.

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Perspective: Morning Commentary for August 4

August 4 – The benchmark Dow Jones Industrial Average surged into the close yesterday to finish almost 700 points higher, at a record close of 53,178 points – easily clearing the previous top from almost a month ago. The S&P 500 is on the brink of its own record as well, while the NASDAQ index is short of June highs but working on a strong three-session rally. All three are pointing to positive openings today. Palantir (a U.S. software company) reported better-than-expected earnings yesterday afternoon post-close to boost the tech sector, though a host of other firms reported strong earnings as well. The ten-year note continues to retreat from Friday’s high, now at 4.67%, with the dollar on the high side of level-par, while the VIX index now under 16 shows reduced volatility.

Matt ZellerTue, 04 Aug 2026, 12:43

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Matt ZellerMon, 03 Aug 2026, 12:45

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Perspective: Mid-Day Commentary for July 31

July 31 – Stocks are clinging to modest gains at midday, with largely better than expected U.S. economic data today providing some optimism to end the week. The VIX briefly spiked to 18.7 earlier in the session but has since settled back to 17.15 at midday. The dollar has given back some of its gains on the day, now only modestly in the green, up roughly 0.1% to trade near 100.06 at the time of writing. Treasury action has been mixed thus far today, but yields remain notably elevated, with 30-year yields trading just below their 19-year high at 5.267%, 10-year yields just off their one-and-a-half-year high at 4.74%, and 2-year yields right at 4.30%. Crude oil remains quietly higher, with nearby WTI up 0.9% on the day near $84.70 and nearby Brent up 0.7% to trade near $87.40. The grains and oilseeds are widely lower at midday, with the wheat complex leading the way down, while the livestock sector is largely in the green.

Mike CastleFri, 31 Jul 2026, 16:33

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