Perspective: Morning Commentary for January 20

By: Arlan Suderman, Chief Commodities Economist

Thu, 20 Jan 2022, 14:44

Perspective: Morning Commentary

Arlan Suderman

Chief Commodities Economist

January 20 – Stocks again attempted to rebound overnight, following another day of sharp losses. The problem is, confidence in the recovery is weak, making it difficult for the recovery to gather upward momentum. The greatest losses have been in the tech sector, which is expected by many analysts to be hurt more by inflation than other sectors. The market expects several rate hikes by the Federal Reserve this year to “tame” inflation, but several rate hikes are not likely to do the job on their own. Thus, a rotation into harder assets continues this week. The VIX pulled back a bit to trade near 23 this morning, after essentially hitting a four-week high 24 on Wednesday. The dollar index firmed to trade near 95.5. Yields on 10-year Treasuries slipped lower to trade near 1.83%, after hitting a one-year high above 1.90% yesterday. The commodities saw some consolidation overnight, with crude oil pulling back from yesterday’s seven-year high just below $88 per barrel, while the Ags were mixed.

First-time claims for unemployment benefits rose sharply to 286K in the week ending January 15^th, up from 231K the previous week and far above the average analyst estimate of 207K. In fact, the highest analyst guess was 232K among those surveyed by Econoday. This increased the four-week moving average to 231K claims, up from 211K the previous week. It was unclear how much of the increase was related directly to Covid, and how many of these claims were related to enforcement of vaccine mandates. Continuing claims for the week ending January 8 rose 84K to 1.635 million, but again, this data point is delayed by a week.

The Philadelphia Fed manufacturing index rose to 23.2 for January, reflecting modest contraction for the sector, after Tuesday’s data from the Empire State showed very flat conditions. Shipments increased this month in the Philadelphia Fed district, but new orders and employment both declined modestly. The survey also showed downward pressure on manufacturing prices, with nearly all of the survey’s future indicators showing continued weakening this month, while still remaining positive overall. This would suggest that the primary obstacle remains the rapid spread of the Omicron variant of Covid-19, and the restrictions and limitations that go with it.

The above data led to speculation that the Federal Reserve may slow down its rate hike and balance sheet contraction talk when it meets next week, leading to a weaker dollar as Treasury yields pulled back. The debate over the Fed’s handling of inflation in the face of Covid-19 over the coming year continues to be the primary topic of conversation. M2 money supply, which includes currency, plus checking deposits and easily-convertible near money, topped $21.6 trillion at the end of 2021, up $6.3 trillion over the past two years, largely due to the massive quantity of fiscal and monetary stimulus in the economy. Currency in circulation is currently at $2.2 trillion, up 24% over the past two years. That puts a lot of money in the hands of the consumer – much of which is also sloshing around in the banking system, which ends up being held in the Treasury market.

One of the debates at next week’s Fed meeting will be over the appropriate pace of rate hikes to tame inflation, but the other related debate will be the timing for starting to withdraw that stimulus – which is artificially supporting stronger-than-normal consumer demand – and the pace at which the Fed should do so. The Omicron numbers will likely scare policymakers from getting too aggressive. Thus, we may see a 25-basis point rate hike in March, although some are now calling for 50-basis points, while there probably will not be enough votes on the Federal Open Market Committee to start withdrawing stimulus. Ironically, contracting the balance sheet by withdrawing stimulus would provide a natural way to raise interest rates, but the Fed will be afraid to be too bold.

Soybean futures surged higher Wednesday amid reports that soybean offers have been withdrawn in Brazil. Farmers are refusing to sell. They believe that drought damage in southern Brazil is much greater than previously believed, which could necessitate higher prices down the road. To be sure, the harvest is rapidly gaining momentum in Center-West Brazil, with generally good yields reported there. It may be true that damage is more significant in southern areas. We should find out more in two weeks when StoneX Brazil releases its updated production estimates. But that does not mean that there are not soybeans available in the near-term from higher-yielding northern areas. They’re simply not be sold by the farmers. The question over when the farmer will sell will continue, but it could send more Chinese business our way if the hold-out lasts much longer, giving another late-season boost to U.S. exports. The market also finds support as traders caught short cover their positions on the board.

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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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Mike CastleThu, 06 Aug 2026, 13:24

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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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