Perspective: Mid-Day Commentary for October 21

By: Arlan Suderman, Chief Commodities Economist

Fri, 21 Oct 2022, 15:14

Perspective: Midday Commentary

Guest Commentary by Mike Castle

Market Intelligence - Fertilizer Analyst

October 21 - Stocks are attempting to rally off morning lows, with the Dow Jones and S&P 500 both in the green while the Nasdaq trades slightly lower at the time of writing. An ugly finish yesterday afternoon carried downward momentum into the morning but the market is attempting to show resiliency and push higher as it did yesterday morning, though the headwinds proved too strong. The VIX has fallen slightly below 30 for the first time this week, potentially indicating a slight easing of fears as we head into the weekend. The U.S. dollar is now in the red after a sharp morning rally, trading near 112.7 at the time of writing, well below this morning's high of 113.942. Yields on 10-year treasuries are trading near 4.25%, while yields on 2-year treasuries trade around 4.53%. Crude oil has traded both sides of unchanged this morning, though the Dec WTI contract is now slightly in the red near $84.40 per barrel. The ags are battling back from morning losses, with soybeans and canola breaking into the green while corn is mixed and the wheat complex remains in the red across the board.

Hawkish comments from the Philadelphia Fed yesterday reversed morning gains and pushed stock futures lower into the close. Philadelphia Fed president Patrick Harker warned yesterday that "given our frankly disappointing lack of progress on curtailing inflation, I expect we will be well above 4% (target rate) by the end of the year." Markets are now pricing in an almost 100% chance of yet another consecutive 75 basis point rate hike at the Fed's November meeting. However, there is some hope for a smaller than 75 point hike at the Fed's December meeting. Regardless, his comments came following the release of bearish October Philadelphia Fed Manufacturing Index data and led to a further spike in treasury yields. Yields on 10-year treasuries surged to a fresh 15-year high of 4.335%, though they've fallen back near 4.25%, still a very elevated level relative to recent history. Despite all the efforts seen so far this year, that soft landing the Fed has been targeting continues to look more and more difficult to obtain.

Ukrainian officials warned today of Russia's plan to blow up the enormous Nova Kakhovka dam on the Dnipro River in southern Ukraine. The dam includes a hydroelectric power plant and also creates the massive reservoir from which the embattled Zaporizhia nuclear power plant draws water for its cooling system. This reservoir is also crucial for irrigation used in agriculture in some of the better-producing ground in southern Ukraine. Russia's military has been furiously targeting Ukrainian energy infrastructure this month in hopes of breaking the people's will with a harsh winter. Destroying the dam would reportedly flood over 80 cities, towns, and villages, impacting hundreds of thousands of civilians. It would also flood the city of Kherson, the focal point of the fighting in Southern Ukraine at the moment. As Ukrainian forces continue to make battlefield advances, it could be a last-ditch effort to punish civilians with scorched earth tactics as they retreat. Looking back in history, this is a strategy the Russians have employed before. In 1941, Soviet forces unexpectedly dynamited the Dnieper Hydroelectric Station dam as they retreated from the Nazis, causing severe flooding that killed tens of thousands of Ukrainian civilians in the process. President Zelensky today asked the West to warn Russia that doing so would be treated the same the use of weapons of mass destruction due to the devastation it would cause. Unfortunately, it seems the escalations in the war don't appear to be slowing any time soon.

Social media stocks are plunging and weighed on markets initially this morning, with Snap Inc leading the way down close to 30% at one point following disappointing third quarter results and a poor fourth quarter outlook. Elon Musk's announcement that he may cut as much as 75% of Twitter's workforce also sent shockwaves through the social media market, with Twitter shares falling over 4% on the day. The negative sentiment through the sector is pushing others lower, with Facebook's parent company, Meta, down near 4.5% and Pinterest Inc. down 8% at the time of writing.

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Energy
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Mike CastleFri, 31 Jul 2026, 16:33

Grains & Oilseeds

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