Perspective: Morning Commentary for February 4

By: Arlan Suderman, Chief Commodities Economist

Fri, 04 Feb 2022, 14:30

Perspective: Morning Commentary

Arlan Suderman

Chief Commodities Economist

February 4 – Wall Street reacted negatively to a positive jobs report this morning, with traders believing that it provides the needed justification for the Federal Reserve hawks to argue for more aggressive action. The White House tried to prepare the markets for a bearish jobs report over the past week, but the numbers came in much better than expected, albeit seasonally adjusted. The VIX traded near 26 following the release of the jobs numbers, while the dollar rallied to trade near 95.6. Yields on 10-year Treasuries pushed to a two-year high above 1.91%, reflecting expectations that the Fed will turn more hawkish following this report. Crude oil prices at new seven-year highs above $92 per barrel add further fuel to the inflation talk that will energize the hawks. The Ags traded higher overnight, but they struggled to maintain those gains going into the morning pause.

The economy created 467K non-farm jobs in January, which was more than triple the 150K expected by analysts, and a total reverse of Wednesday’s ADP report showing a loss of 301K jobs during the month. Today’s government report indicated that the private sector added 444K jobs in January. Furthermore, the Department of Labor revised its December numbers to show that the economy added 510K jobs during that month, up from the 199K originally reported. Combined, that’s 628K more jobs created than expected over the past two months. Leisure and hospitality added 151K jobs in January, a month in which Omicron numbers were peaking and cold winter weather had people focused on indoor activities, but also a month in which Christmas bills came due. The labor participation rate rose to 62.2% in January, which is a big move for that indicator, up from 61.9% the previous month and above analyst expectations that it would fall to 61.8% due to Omicron.

Wall Street traders came to work today expecting to see more hard evidence that the economy is struggling. Instead, they saw evidence that the economy is structurally sound. Omicron blew out all previous records before it peaked mid-month in January, but the economy kept going. Many people were required to stay at home due to the illness, which for many, meant that they were not collecting a paycheck. Those people were considered unemployed by today’s report, but yet the numbers were still strong. Energy prices are soaring, reinforcing talk of high inflation. The Fed has the ammunition it needs to shrink the size of Wall Street’s candy bowl, and traders do not like that. Losses would be a lot greater, but the market has already seen a large selloff in recent weeks on fears that the Fed would both raise interest rates and start shrinking their balance sheet – withdraw stimulus from the economy. Removing the candy bowl means that Wall Street must stand on the strength of the economy’s fundamentals. That means a period of adjustment, which has resulted in money rolling into the commodity sector due to the ongoing inflation story. Yet, today’s jobs numbers, if confirmed by future jobs reports over the next several months, would suggest that the economy may have the fundamental strength to support the market if fiscal and monetary policymakers don't mess things up. That is the biggest fear for 2022.

Crude oil prices rallied above $92 per barrel for the first time since October 2014 this morning. Several factors are responsible for the continued upward increase. OPEC+ can’t produce what it says it will produce, which has allowed global demand to rise faster than supply. Back home in the States, demand for energy is up due to recent cold weather, but that cold has also disrupted production in the shale oil fields. Geopolitical risks remain with us as well, with traders fearing that the Russia/Ukraine conflict could disrupt crude oil supplies out of the region. Meanwhile, continued attempts to hit oil facilities in the Middle East by Iranian backed rebels adds another element of risk to the supply side of the balance sheet. The bottom line though is that a pullback in energy prices in November and December had helped to moderate inflation expectations. Now they’re energizing inflation once again.

Next week’s USDA WASDE crop report is a big one. The agency tends to be conservative in adjusting South American production until the February report. That’s when it tends to reflect problems when they exist. But the production cuts showing up in the private estimates are much larger than USDA likes to do in a single report. Normally, I’m skeptical of big private sector cuts in a single month, but the cash market provides validity to the estimates in the mid-120s mmt range for Brazil’s soybeans, let alone big cuts for Paraguay, Uruguay and possibly Argentina. Brazil’s exportable soybeans are now priced above U.S. Gulf supplies from May forward, suggesting that Brazil’s domestic crush market is determined to keep soybeans at home this time around, and not to allow the export market to have the supply from May forward. That has huge implications for the U.S. balance sheet.

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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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Matt ZellerWed, 05 Aug 2026, 12:39

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Perspective: Mid-Day Commentary for August 4

August 4 – The Dow Jones is absolutely piling on gains today, adding a similar number that led to yesterday’s record, with the benchmark index now nearing the 54k-point mark through mid-morning. The S&P also hit a new record, while the NASDAQ is exceeding both those gains on a percentage basis. The marketplace is optimistic on a U.S.-Iran trade deal, though the proposed resolution is still being “circulated between the parties”.

Mike CastleTue, 04 Aug 2026, 14:58

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