Perspective: Morning Commentary for May 18

By: Arlan Suderman, Chief Commodities Economist

Thu, 18 May 2023, 13:36

Perspective: Morning Commentary

Arlan Suderman

Chief Commodities Economist

May 18 – Stock futures fell, the VIX firmed, and the dollar rallied with Treasury yields on this morning’s smaller-than-expected weekly jobless claims numbers that contribute to a slowly growing number of people on Wall Street who think that the Federal Reserve may have more rate hikes in store for the U.S. economy. The VIX is still trading near 17 this morning, albeit off its low. The dollar index is trading near 103.4, which is nearly a seven-week high. Yields on 10-year Treasuries are trading near four-week highs near 3.63%, while yields on 2-year Treasuries are trading near a four-week high of 4.23%. The above adds to bearish headwinds for the broader commodity sector to start trade today. Crude oil prices are modestly lower, while the bloodbath continues in the grain and oilseed sector, with double-digit losses across the board.

First-time claims for unemployment benefits fell to 242K in the week ending May 13, down from 264K the previous week, and below expectations that they would drop to 255K. The four-week moving average slipped to 244.25K claims, down from 245.25K the previous week. Continuing claims for the week ending May 6 dropped by 8K to 1.799 million after the previous week’s total had been revised down by 6K. The four-week moving average for continuing claims fell by 15.5K to 1.812 million. This suggests a tightening of the jobs market again in the month of May, which is the opposite direction that you need for easing wage inflation.

The Philadelphia Fed manufacturing index for May improved to a -10.4, up from -31.3 the previous month, and better than analyst expectations of -20. Make no doubt about it, a negative number still means contraction from the previous month, but the pace of the contraction is slowing. The survey’s indices for general activity, new orders and shipments rose this month, although they remain negative. Overall, surveyed firms reported a decline in employment, with prices declining further as well. Surveyed firms continued to reflect muted expectations for growth over the next six months.

Expectations that the Fed will boost its benchmark interest rate another 25 basis points on June 14 jumped to 45% this morning, up from 28% yesterday and up from just 11% a week ago. There’s a growing acknowledgement on Wall Street that the Federal Reserve may not be done with rate hikes, and traders are also dialing down their expectations of rate cuts later this year. In other words, they’re starting to believe what the Fed has been telling them all along. The market was pricing in three rate cuts a week ago to 4.25%, but now those December rate expectations are rising to 4.5%, or even possibly 4.75%. Yet, the tech sector, which was hurt the most by rising interest rates, rose to its highest level since late August in trade yesterday. Wall Street seems to be coming to grips with reality, and it’s not as afraid of it as it once was. That’s not as true for the commodity sector but easing fears in the equities is a first step.

China’s special envoy was in Ukraine yesterday to meet with Ukraine’s foreign minister, who conveyed to China that Ukraine will not accept any peace proposal that involves the loss of its territories, which in the past has also included Crimea. Ukraine demands the immediate withdrawal of all Russian troops from these territories as a precondition for any potential negotiations, which of course is a non-starter with Russia. China’s envoy now travels to Europe to meet with select leaders, before ending this trip in Moscow. European leaders remain solidly behind Zelensky’s plan as a working framework for a political solution to the war. As such, there’s little hope at this point that China will be successful at working out a peace plan. On a related matter, Russia finally agreed Wednesday to another 60-day extension of the Ukraine grain initiative, although I anticipate that we’ll continue to see Russia slow-walk ship inspections to reduce the amount of grain moving through Ukrainian ports in the weeks ahead.

Day #2 of the Kansas wheat tour found results even worse than the first day, as we expected. In fact, one tour participant summarized the day by saying it was tough to find wheat that wasn’t zeroed out and that could be measured. This brought a criticism from an observer that the tour was selecting the “best” fields to sample, insisting that the zeroed-out fields should have been counted as well. Another tour participant reported a high number of spray rigs burning down poor wheat fields for planting alternative crops, saying it was hard to find a field to sample that wasn’t either irrigated or zeroed out. Nonetheless, the day’s average yield was 27.5 bushels per acre, down from 37.0 bpa in last year’s drought-shortened crop and below the five-year average of 44.7 bpa. I again argue that abandonment will likely be higher than currently forecast by USDA. Yet, all of this may already have been priced into the market. We know that wheat from Eastern Europe is making its way into the United States, which argues that U.S. hard red winter wheat had become overpriced relative to local supply and demand fundamentals. So, as bad as it is, the bulls still find themselves lacking an argument for now. However, it does leave world milling supplies tight, keeping a larger focus on potential problems with the crop in Argentina, Australia, Canada, Russia, and Kazakhstan.

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Perspective: Morning Commentary for August 7

August 7 – The U.S. economy unexpectedly lost 23k jobs in July, dramatically below market expectations of an 80k increase and marking the worst Non-Farm Payrolls print since February. Furthermore, May and June were both revised sharply downward, with combined revisions showing 103k fewer jobs than previously reported. Outside of the healthcare sector, which added 22k jobs in July, the losses were very broad-based. Government payrolls saw the largest decline, shedding 53k jobs in July, the largest seen since October 2025, while June was revised down to show a loss of 10k jobs as well. The private sector at least saw growth, adding 30k jobs in July, now matching the month prior after it was revised down from the 49k initially reported, and substantially missing forecasts of 78k jobs being added. This is a sharp reversal in course from the largely better than expected U.S. labor data seen earlier this week.

Mike CastleFri, 07 Aug 2026, 13:26

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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.

Mike CastleThu, 06 Aug 2026, 13:24

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Perspective: Mid-Day Commentary for August 5

August 5 – The Dow Jones is ripping higher for yet another session, up safely over 500 points at the time of this writing to carve out another record high; the S&P and NASDAQ are a bit less enthusiastic but the former is still making its own record high, while the latter is less than 500 points off its own top thanks to a strong ongoing week of trade. The dollar is churning lower this morning in an effort to re-test Monday’s 1 ½-month low, while the ten-year note has flipped higher in the mid-morning hours. The CME FedWatch tool interesting has market odds of a quarter-point rate hike next month coming closer to a 50-50 proposition as crude oil prices decline.

Mike CastleWed, 05 Aug 2026, 15:19

Grains & Oilseeds

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