Perspective: Morning Commentary for February 2

By: Arlan Suderman, Chief Commodities Economist

Thu, 02 Feb 2023, 14:13

Perspective: Morning Commentary

Arlan Suderman

Chief Commodities Economist

February 2 – Wall Street continues to celebrate an anticipated Fed pivot, even though that is the opposite of what it said on Wednesday. Money continued to rotate back into the tech sector overnight, believing that the Fed will act contrary to what it said it would do. Commodity prices found buying interest as both the VIX and the dollar came under pressure, although crude oil prices fell back into negative territory on a build in both oil and product inventories that suggests soft demand despite signs of economic recovery. The VIX traded to fresh one-year lows near 17 this morning, while the dollar index is trading near 101.3 after dipping to a fresh nine-month low earlier in the session. Yields on 10-year Treasuries are trading near 3.34%, while yields on 2-year Treasuries are trading near 4.04%. Crude oil prices are posting modest losses, while grain and oilseed prices were mostly higher overnight.

First-time claims for unemployment benefits fell to just 183K in the week ending January 28, down from 186K the previous week, and below analyst expectations of 193K. This drops the four-week moving average to just 191.75K claims, down from 197.5K the previous week. Continuing claims fell 11K to 1.655 million, after the previous week’s number was also revised downward by 9K. These are not numbers to support easing wage inflation. The Challenger job cut report showed announcements of 102,943 planned layoffs, which does suggest an easing employment picture, but other data continues to show that in large these laid off employees are finding new jobs rather quickly.

Non-farm productivity increased at an annualized rate of 3.0% in the fourth quarter of 2022, beating analyst expectations of 2.4%. Increased productivity tends to come when workers worry more about keeping their jobs, and yesterday’s data did show a lower job-quit rate, suggesting that employees are feeling a bit less secure in the job market. However, productivity for the third quarter was also increased to 1.4%, up from the 0.8% originally reported. The higher productivity lowered unit labor costs increases. Those unit labor costs rose at an annualized rate of 1.1% in the fourth quarter, down from 2.0% in the third quarter and below analyst expectations of 1.5%, suggesting some easing in the upward pace of wage inflation at least as productivity increases.

The Federal Reserve raised its benchmark interest rate another 25 basis points on Wednesday, which is what was expected by the market. However, it also made it quite clear that while it acknowledged a pullback in the pace of inflation, it also again pointed to the tight labor market that will keep inflation pressures a problem for some time. As such, it stated that we’re probably looking at least 50 more basis points of increase when the market had only been expecting another 25. The Fed also maintained a hawkish tone regarding the duration of monetary tightening. Yet, Wall Street doesn’t believe it. Traders are now convinced that the economy is resilient, and that the economy can handle these higher interest rates without a recession. One of the reasons that the economy is still being so resilient is the amount of stimulus that is still in it. Part of that is fiscal stimulus, but part of it is that the Fed has really only begun to withdraw that stimulus from the economy. That will take several years to accomplish, and then we’ll see the effects of monetary tightening in full force.

In the end, the Fed will not be able to draw inflation down to its 2% mandate without bringing wage inflation under control. Yesterday’s JOLTS report showed job postings rising again to over 11 million, providing further evidence of a tight jobs market. That suggests even greater competition for available workers, translating into more wage inflation. This will put tomorrow’s monthly jobs report at the forefront for providing key data on the employment sector. The bottom line is that the Fed has to do what it says it is going to do if it is going to stay true to its mandate. Wall Street simply doesn’t believe that it will do so, because there have been times in the past when it did not do so. The Fed will have to prove that it will do what it says it will do at some point, because failure to bring wage inflation under control could do long-term damage to the economy as high inflation becomes ingrained into it. For now, Wall Street will believe what it wants, and perception is reality in the markets until it isn’t.

Money flow is coming back into the grain and oilseed sector to start the month. Fundamentally, traders point to a weaker dollar, Argentina’s drought, delayed harvest progress in Brazil, China coming out of Covid, and increasing conflict in Ukraine, but that is largely to justify its desire to own more commodities in 2023. Never argue with money flow, although you must always remember that money flow can flip very quickly with the next headline.

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Perspective: Morning Commentary for August 7

August 7 – The U.S. economy unexpectedly lost 23k jobs in July, dramatically below market expectations of an 80k increase and marking the worst Non-Farm Payrolls print since February. Furthermore, May and June were both revised sharply downward, with combined revisions showing 103k fewer jobs than previously reported. Outside of the healthcare sector, which added 22k jobs in July, the losses were very broad-based. Government payrolls saw the largest decline, shedding 53k jobs in July, the largest seen since October 2025, while June was revised down to show a loss of 10k jobs as well. The private sector at least saw growth, adding 30k jobs in July, now matching the month prior after it was revised down from the 49k initially reported, and substantially missing forecasts of 78k jobs being added. This is a sharp reversal in course from the largely better than expected U.S. labor data seen earlier this week.

Mike CastleFri, 07 Aug 2026, 13:26

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Perspective: Morning Commentary for August 6

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Mike CastleThu, 06 Aug 2026, 13:24

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Perspective: Mid-Day Commentary for August 5

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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