Perspective: Morning Commentary for October 19

By: Arlan Suderman, Chief Commodities Economist

Tue, 19 Oct 2021, 13:40

Perspective: Morning Commentary

Arlan Suderman

Chief Commodities Economist

October 19 – The broader markets have a “risk-on” tone to them to start the trading day today, fueled by strong earnings reports thus far from the third quarter, although the enthusiasm cooled a bit when this morning’s housing starts data was released. The VIX is trading near 16 this morning, reflecting a new sense of complacency on Wall Street once again. The dollar is trading near 93.7 this morning, representing a three-week low, as yields on 10-year Treasuries trade near 1.61%. Crude oil prices are trading modestly lower just below yesterday’s seven-year highs, while the Ags posted modest gains overnight.

Housing starts fell to an annualized rate of 1.555 million units in September, falling well below analyst expectations of 1.621 million. Furthermore, the August number was revised to 1.580 million, down from the 1.615 million originally reported. Permits for future housing starts fell to 1.589 million in September, which came in well below analyst expectations of 1.680 million. The August numbers were revised very modestly lower to 1.721, down from the 1.728 million originally reported. It’s not unusual to have notable fluctuations in housing start numbers, so several months of data are needed to identify trends. Yet, today’s numbers suggest that high costs, labor shortages and eroding consumer confidence are beginning to take their toll on the willingness of individuals to build a new home. Even so, today’s reported number for housing starts in September was still up 7.4% year-on-year.

Wall Street fund managers are focusing on inflation and strong earnings reports currently, with Washington currently at a stalemate. The Democrats continue to negotiate with themselves on the type of spending package they can accumulate enough votes to move through the process. They have not been able to reach an agreement thus far, leading Wall Street to focus on the strength of the economy as is. Washington will again be the focus one day. Either the Democrats will reach an agreement to get movement again on the spending packages, or we will reach early December when funding to keep the government open, as well as the debt ceiling will again be an issue. All of the above are related, but a stalemate in Washington is generally seen as positive for Wall Street, unless it means inability to solve a significant problem. The debt ceiling would be the primary risk factor in the above list.

Covid cases here in the United States continue to drop, with the seven-day moving average falling to its lowest level in nearly three months and the seven-day moving average for Covid-related deaths is at a two-month low. These declining numbers are good for the economy and for demand for commodities. A developing risk is the government’s vaccine mandate for any government employee, as well as contractors who receive government money. I’m not speaking here on the pros or cons of the mandate, but on the unintended consequences of the policy. Whether you agree or disagree, there is a significant number of people who are currently making a decision whether they will get the jab or get fired. For example, some estimates indicate that up to 40% of TSA workers are not vaccinated. A significant number of nurses at hospitals and nursing homes that accept government payments are also not vaccinated. What will be the impact on consumer sentiment, and therefore on the economy, if these people walk away from their jobs rather than to get vaccinated? Many of the deadlines for the mandates come in late November into mid-December, just ahead of Christmas. Meanwhile, China has another possible outbreak. It reported another nine new local cases in Inner Mongolia and Shaanxi provinces. That means more quarantines and lockdowns that continue to slow economic growth there.

The U.S. grain and oilseed markets show signs of trying to carve out a harvest low, with the fall harvest reaching the midway point. The charts have not yet confirmed a harvest low, so prices remain vulnerable. However, the renewed focus on inflation on Wall Street seems to be providing underlying support on price breaks. The biggest focus is on the energy markets. Energy is in relatively tight supply, with the Northern Hemisphere winter still in front of us. That has crude oil at seven-year highs, with coal at record high prices in places, while natural gas is doing the same. Those high energy prices translate into higher prices for just about everything, with the primary focus in the Ags being on crop inputs for the 2022 crops. There are already unconfirmed reports of fertilizer shortages in Brazil, although I remain skeptical of the scope of those at this early date. Those shortages may become more pronounced though as we move into 2022 if we remain on the same trajectory. This story helps draw money into the Ags, as well as the Energies. The next Fed meeting is in two weeks, which could create more fireworks in the broader markets following last week’s high inflation numbers.

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Perspective: Morning Commentary for August 7

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Mike CastleThu, 06 Aug 2026, 13:24

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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

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