Perspective: Morning Commentary for January 6

By: Arlan Suderman, Chief Commodities Economist

Thu, 06 Jan 2022, 14:32

Perspective: Morning Commentary

Arlan Suderman

Chief Commodities Economist

January 6 – The hawks have regained their influence at the Fed. Stock futures bounced early this morning following an abrupt selloff Wednesday afternoon, but there’s a new sheriff in town, and he’s wearing the feathers of a hawk. The tech sector was hit the hardest by the selloff, as it is seen by many as being most vulnerable in a higher interest rate environment. The VIX surged to a two-week high above 20 overnight, but it has since settled back to trade near 20. This will be a key indicator to watch in the days ahead as Wall Street digests the new monetary policy environment. The dollar index continues to consolidate near 96.2, despite a surge in Treasury yields to a nine-month high above 1.75% this morning, up 24 basis points this week. Crude oil prices are at a seven-week high this morning on geopolitical risks that risk tightening global crude oil supplies, while the Ags are mostly lower.

First-time claims for unemployment benefits rose to 207K in the week ending January 1^st, up from an upwardly revised 200K the previous week. That raises the four-week moving average to 204.5K claims, up from 199.25K the previous week. Continuing claims for those long-term job seekers rose to 1.754 million, up 36K from the previous week, which had been a post-pandemic low. The weekly jobless numbers had been impressive in recent weeks, despite the surge in Omicron cases, setting the stage for a strong monthly jobs report tomorrow. This morning’s numbers are still good, but they raise a possible red flag about the adverse impact of the rising Covid numbers on the jobs sector. However, the data for this morning’s jobless report was largely collected after the data was gathered for tomorrow’s monthly jobs report. That report is expected to show that the economy created 400K new jobs in December, with the unemployment rate ticking lower to 4.1% and annual wage inflation at 4.1%.

The Federal Reserve finally shifted hawkish in its demeanor, or at lest that’s how the minutes from the latest Fed meeting that were released Wednesday afternoon are being interpreted. The minutes of the December Fed meeting indicated that Fed members were uniformly concerned about inflation and a “very tight” job market. “Participants generally noted that, given their individual outlooks for the economy, the labor market, and inflation, it may become warranted to increase the federal funds rate sooner or at a faster pace than participants had earlier anticipated. Some participants also noted that it could be appropriate to begin to reduce the size of the Federal Reserve’s balance sheet relatively soon after beginning to raise the federal funds rate.” Those concerns appeared to outweigh fears that Omicron could threaten the economy, at least that was their view three weeks ago when they met. We may get a different view from them when they meet again in three weeks, or even when various Fed members speak publicly in the days ahead. But for now, the market took note of the marked shift in the Fed’s tone.

The headlines focused on the earlier and faster rate hike possibility, but that wording shouldn’t have surprised anyone, which is why we’ve seen a bit of recovery in the equities and a muted response from the VIX thus far. After all, the famous dot plot graphic released after the December Fed meeting told us how individual members felt about rate hikes, although the minutes give us confidence the hikes will start at the March meeting when tapering is over. In fact, Fed fund futures trading now puts nearly 68% odds on the chance of a March rate hike, with the second hike expected in June. But the bigger surprise was the possibility that we could see the Fed start to reduce the size of its balance sheet soon after starting with the rate hikes. It waited two years to attempt to reduce the balance sheet last time. Clearly, some Fed members believe that there is too much stimulus still in the economy that must be withdrawn to notably reduce inflation pressures. The Fed’s balance sheet is currently at $8.8 trillion, up from $4.2 trillion at the beginning of the pandemic and up from 0.9 trillion in mid-2008. That’s what scares Wall Street more.

Fiscal and monetary stimulus is the drug of choice that feed’s Wall Street’s addiction. Much of that money flows into the markets, contributing to current near-record highs for stocks and abnormally high commodity prices. Strong economic growth can still support these values, but traders will need to see that the economy can be safely weaned off the stimulus at an appropriate pace, while still remaining strong enough to justify these values. Furthermore, the markets are currently viewing commodity fundamentals through an inflation filter. That no longer becomes necessary IF the Fed is successful at taming inflation. That now becomes the big question. Historically, the markets have managed supply and demand at a higher level in times of inflation. Crude oil prices surged higher overnight on geopolitical risks in Kazakhstan and Libya, while the Ags remained weak amid portfolio rebalancing and positioning for next week’s big USDA set of crop reports.

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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: Mid-Day Commentary for August 6

August 6 – Stocks remain quietly mixed at midday as both the S&P 500 and Dow Jones remain just below their fresh all-time highs put in yesterday. This is allowing the VIX to cool to a four-week low below the 15.4 mark, reflecting the collective sigh of relief in the market amid largely better than expected U.S. economic data today. The dollar remains quietly in the green in its relatively tight range this week, trading at 99.9 at the time of writing. Treasuries remain elevated but have cooled from their recent peaks, with 30-year yields trading at 5.189%, 10-year yields trading at 4.647%, and 2-year yields trading at 4.229% at midday. Crude oil also remains quietly in the green, with nearby WTI up 2.3% on the day trading near $76.80 and nearby Brent up 2.4% on the day trading near $81.40. The ags remain mixed, with the wheat complex now squarely in the red while corn and soybeans cling to small gains, and the livestock complex largely pushes lower.

Mike CastleThu, 06 Aug 2026, 15:18

Grains & Oilseeds

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