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Perspective: Morning Commentary for September 18

By: Arlan Suderman, Chief Commodities Economist

Perspective: Morning Commentary
 
Arlan Suderman
Chief Commodities Economist

 

 

Guest Commentary by Matt Zeller, Senior Market Intelligence Analyst

 

September 18 – Dow Jones Futures are once again favoring the positive side this morning, even showing a similar track yesterday before the DJIA finished with a small loss off Monday’s record highs. NASDAQ and S&P 500 futures are also showing minor gains today, with the 10-year treasury ticking higher to 3.67%, and the VIX index shading higher to around 18 – well off early August and September spikes. The trade is still waiting for the Fed decision this afternoon, with the FedWatch tool showing 65% odds for a 50-basis-point cut, 35% for a 25-point drop.

 

MBA Mortgage Applications kicked off the housing data this morning with a 14.2% increase for the week ending September 13, up from +1.4% the week prior and the fourth consecutive weekly increase. Purchases rose just 5.4% but refinancings were up a whopping 24.2% week-on-week as the average 30-year fixed mortgage rate fell from 6.29% to 6.15% - the lowest number in two years. August Housing Starts were also strong at 1.356 million, up from the average 1.318 million trade estimate and 1.237 million in July, with Building Permits beating expectations as well at 1.475 million in August, up from the 1.410 million trade guess and 1.406 million last month. Rapidly falling Fed rates (as the market is hoping for) could put in a jolt into the housing market by lowering financing costs, and theoretically increasing inventories of existing homes, thus taking some heat off high prices.

 

Commodity Weather Group forecast maps below current outlooks for the next three five-day periods, for the main GFS and European forecast models. Rains continue to favor the center-south, good for increasing moisture for southern soybeans and first-crop corn plantings, but chances are still mostly circling around the main soybean state of Mato Grosso (crudely indicated by me by the red star below). All indications are that rains will continue to increase into mid-October and planting can kick off then – not a huge problem for soybean production, but potentially an issue for the country’s subsequent second corn crop that makes up around 75% of total production. Soybeans rocketed out of the gate last night and are holding on to double-digit gains across the complex this morning, with gains at more than 1% for oil and meal as well. U.S. harvest pressure should continue to cap any rallies, with a big crop on its way out of the fields; anecdotal yield reports have been strong in the heart of the belt, though some areas did suffer from a hot and dry August, leaving yields a bit short of lofty expectations.

 

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