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Perspective: Mid-Day Commentary for July 2

By: Mike Castle, Market Intelligence - Fertilizer Analyst

July 2 – It’s a tale of two extremes on Wall Street at midday, with the lower rate expectations following this morning’s ugly jobs print providing tailwinds to drive the Dow Jones to another fresh all-time high and remain in the green (+0.5%) at the time of writing, while the ugly selloff in the tech sector is driving the Nasdaq sharply lower (-2.1%), leaving the S&P caught in the middle (-0.6%). The VIX remains relatively muted, up from the morning lows but still on the low side of recent ranges as it hovers around 16.7. The dollar continues to hang in the red amid the aforementioned shift down in rate expectations, though it has bounced from its lows as it currently hangs around the 100.8 level. Treasuries are mixed at midday as well, with 10-year yields up on the day to 4.48% while 2-year yields are down on the day to trade near 4.13%. Crude oil has rebounded through the session as well, with nearby WTI now slightly in the green around $68.20 while nearby Brent remains slightly in the red near $71.20. The ags have lost steam through the session, now trading largely mixed after erasing morning gains.

U.S. factory orders declined 1.3% month-on-month in May, above the average estimate of -1.8% but still a notable drop from the upwardly revised 5.3% increase seen in April and representing the sharpest monthly decline since last July. Excluding transportation, however, new orders for U.S. manufactured goods rose an impressive 1.9% month-on-month in May, up from an upwardly revised 1.7% in April and marking the highest reading since March 2022. Durable goods orders fell 4.5% month-on-month, though again looking exaggerated by comparison to the 8.5% jump in the month prior. Drilling down to orders for non-defense capital goods excluding aircraft, often seen as a proxy for spending plans, orders rose by 1.6% in May after falling 0.7% in April. In general, this morning’s release feels a bit noisy in the backdrop of recent strength in U.S. manufacturing data elsewhere, though it will be worth keeping an eye on upcoming releases for confirmation of that strength.

Weekly old crop (‘25/’26) soybean export sales fell to a new marketing year low at a net 1.5 million bushels, mostly just a shift to China from sales previously reported to unknown destinations. New crop (‘26/’27) soybean sales took a step back as well, falling to 6.7 million bushels, mostly to Mexico, after an impressive 33.15 million in the week prior. Weekly corn sales were solid as well, with a net 28.8 million bushels of old crop (‘25/’26) sales and 30.2 million bushels of new crop (‘26/’27) sales; both were in line with estimates. All wheat sales matched the low-end estimate at 11.0 million bushels, with Mexico the top destination there. It’s been a slow start for U.S. wheat exports thus far in the ‘26/’27 marketing year, with cumulative sales of 213.02 million bushels representing a 19.2% year-over-year decline and the weakest pace through the first four weeks since 2023. Looking elsewhere at the global market, this morning’s announcement of a fresh 655k metric ton (24.07 million bushel) wheat tender from Saudi Arabia appears to be providing a bit of a boost after already seeing gains in recent days in the wake of sharply lower than expected U.S. and Canadian wheat acres.  

Perhaps the most notable standout from this morning’s Export Sales report was the eye-popping beef sales print of 126.10k metric tons—this is very clearly a mistake on USDA’s end though, so we would expect to see a revision forthcoming. USDA issued a note of “late reporting” for 111.16k metric tons in the report, meaning the week’s true sales number should be around 14.94k, a much more believable figure. We would assume that additional “late reporting” figure to be overstated by a sizable magnitude; it wouldn’t be a shock to see some minor corrections following their switch to the new reporting system in March, but nowhere near this volume. As such, the market should be ignoring this figure as noise and appears to be doing so.

This morning’s June wage growth figure of 3.5% year-over-year means we’re likely to see a third consecutive month of declining real wage growth at the consumer level with it being unlikely for CPI to drop that much from May’s 4.2% rise. The graphic below looks back at consumer level real wage growth since the beginning of the BLS Average Hourly Earnings series in early 2007. As can be seen, real wage growth at the consumer level (year-over-year percentage change in average hourly wages versus year-over-year percentage change in CPI) had held in positive territory for 35 consecutive months after an ugly 25-month streak in negative territory from early 2021 through early 2023. That winning streak was broken by the resurgence of consumer level inflation this spring. The Cleveland Fed’s NowCast is currently indicating June CPI of 3.92%, which is what’s plugged in for illustrative purposes below. Obviously, three months by itself is not cause for alarm, especially given the two-year plus streak earlier in the 2020’s. However, it’s important to keep in mind that there are less buffers in place this go around—weaker labor demand, less excess savings from pandemic transfers, no more massive increases in home values/equity to cushion the blow. Households have broadly not stopped spending, but much of this maintained spending has been done by reducing savings and increasing reliance on credit. This will be worth keeping a close eye on moving forward, especially if we see additional weakness in the labor market in the months ahead.

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Perspective: Mid-Day Commentary for July 2

July 2 – It’s a tale of two extremes on Wall Street at midday, with the lower rate expectations following this morning’s ugly jobs print providing tailwinds to drive the Dow Jones to another fresh all-time high and remain in the green (+0.5%) at the time of writing, while the ugly selloff in the tech sector is driving the Nasdaq sharply lower (-2.1%), leaving the S&P caught in the middle (-0.6%). The VIX remains relatively muted, up from the morning lows but still on the low side of recent ranges as it hovers around 16.7. The dollar continues to hang in the red amid the aforementioned shift down in rate expectations, though it has bounced from its lows as it currently hangs around the 100.8 level. Treasuries are mixed at midday as well, with 10-year yields up on the day to 4.48% while 2-year yields are down on the day to trade near 4.13%. Crude oil has rebounded through the session as well, with nearby WTI now slightly in the green around $68.20 while nearby Brent remains slightly in the red near $71.20. The ags have lost steam through the session, now trading largely mixed after erasing morning gains.

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