Perspective: Morning Commentary for August 17

By: Arlan Suderman, Chief Commodities Economist

Wed, 17 Aug 2022, 13:23

Perspective: Morning Commentary

Arlan Suderman

Chief Commodities Economist

August 17 – Stock futures came under pressure early today after Target’s earnings report disappointed, and ahead of this morning’s retail sales data. The VIX firmed above 20, but there’s still no sense of panic on Wall Street. The dollar index firmed to trade near 106.8. Yields on 10-year Treasuries traded near 2.87%, while yields on 2-year Treasuries traded near 3.34%, spending time at two-month highs this morning. Crude oil prices are mixed, as they consolidate near their lowest levels since January. The grain and oilseed sector found solid buying interest early this morning, following recent sharp losses.

Today’s retail sales data had a few surprises packed hidden behind the headline number, suggesting better economic activity than anticipated. The headline number suggested that retail sales were flat month-on-month in July, after being up 1.0% in June. Analysts expected 0.1% gains. Keep in mind that sales are a product of volume times price – they’re a combination of those two factors. Gas prices were tumbling in much of July, which would offset an increase in volume of that or other products. Retail sales minus vehicles rose 0.4% month-on-month, down from 1.0% gains in June, but well above the 0.1% decline anticipated by analysts. Retail sales minus vehicles and gas rose a healthy 0.7% month-on-month in July, matching the previous month, and more than double the 0.3% expected by analysts. That would have been a combination of an increase in both volume and price, but it was certainly better than expected, which garnered the attention of traders. Retail sales overall are up 10.3% year-on-year, with much of that being a product of inflation, but that still suggests some economic growth in output.

The bottom line is that today’s numbers still provide fodder for the hawks at the Federal Reserve desiring to maintain monetary tightening policy. Fed fund futures had been betting on a 50-basis point rate hike from the Federal Reserve at its September meeting, but that flipped to better than even odds of a 75-basis point hike in this mornings trading. It’s interesting to note that Fed fund futures have continued to reflect a more dovish expectation for rate hikes than the Fed’s own dot plot graphics released after its meetings. The market continues to expect the Fed to lose its courage and to moderate its tone before the next meeting, but then the Fed comes through with a more hawkish rate hike. There’s good reason for the market’s skepticism, given the Fed’s longer-term history, but the current Fed sentiment is very solidly committed to bringing down inflation. We’ve never done that in America without getting positive real interest rates – pushing rates above the rate of inflation. We’re still no where close to that yet. Pushing rates above the rate of inflation presents real challenges for the U.S. economy, while also dramatically increasing credit risks for developing countries holding dollar-denominated debt. But the Fed seems to believe that it must do so regardless. However, the question that still remains unanswered is, how much will next month’s increased pace of shrinking the balance sheet push rates higher? It probably won’t have much of an impact until excess cash sloshing around in the banking system is absorbed, but the impact should increase beyond that.

Power shortages are popping up in China due to the intense drought in the Yangtze River Valley curtailing hydro-electric power generation. Some soybean crushing plants saw operations closed, but not enough to significantly impact overall production. Corn and rice production is significantly impacted in the region. This isn’t in the heart of the corn producing region, but some estimates put losses as high as 8 million metric tons, although others are much lower. Rice is probably the crop most impacted as it goes through its reproductive phase. The Ministry of Agriculture allocated 300 million yuan ($44 million) in emergency aid for cloud seeding, short-season crop seed to replace damaged crops, and for adding fertilizer to strengthen the crop’s ability to withstand the heat (yes, you read that correctly). The official line in China is that the steps to mitigate losses are being effective, and that overall production has not been notably curtailed. This year’s anticipated Chinese corn crop was already expected to fall 24 mmt short of anticipated demand. Any additional shortfall simply increases the deficit that must be filled with imports and alternative crops.

The good news is that 560K metric tonnes of agricultural products left Ukraine ports on 21 ships in the first 15 days of August. The bad news is that just 560K tonnes left the ports. Most of that volume was corn. That’s not a strong enough pace to meet global demand with a short European crop, especially if the U.S. crop ends up being short as well, although that’s not yet determined. Grain and oilseed prices bounced this morning amid chatter of end user buying. The primary focus now is on next week’s industry crop tour for getting a look at this year’s crops in the field.

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Perspective: Morning Commentary for August 5

August 5 – U.S. equities markets are on fire this week, with both the Dow Jones and S&P 500 setting new all-time highs yesterday with futures indicating further gains again today; the marketplace remains optimistic over a deal with Iran despite no evidence of such as of yet. Crude oil is working on a lower high and low today but remains slightly on the high side on the session, while the dollar is retreating back towards Monday’s nearly two-month low. The ten-year note is steady-to-lower this morning (though solidly lower so far this month) at 4.605%, while the VIX index continues to rebound into mid-week at almost a 17-point reading this morning.

Matt ZellerWed, 05 Aug 2026, 12:39

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Perspective: Morning Commentary for August 4

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Matt ZellerTue, 04 Aug 2026, 12:43

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Perspective: Mid-Day Commentary for August 3

August 3 – The Dow Jones is up over 500 points as of the time of this writing, right in the range of the record high close just under a month ago; the marketplace at least appreciates the rhetoric from Trump calling for negotiations, and WTI crude oil dropping by around $5/bbl. The S&P and NASDAQ are also up 1% or better on the session, while treasury yields suffer chop lower on the day, with the ten-year note down slightly at 4.69% at this time.

Mike CastleMon, 03 Aug 2026, 15:10

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