By: Mike Castle, Market Intelligence - Fertilizer Analyst
Guest Commentary by Mike Castle
Senior Commodities Economist
July 1 – Stock futures are pointing to a lower open after back-to-back days of strong gains to start the holiday-shortened week, with the major indexes all remaining within shouting distance of their most recent all-time highs. The VIX is up slightly on the day but remains low relative to recent trade, hovering around 16.8 at the time of writing. The dollar is currently trading just above 101.5, its highest level for the week thus far. Sticking in the currency markets, it’s worth pointing out that the Japanese Yen has hit another fresh 40-year low versus the dollar today after a big move yesterday, keeping lingering concerns of government intervention to support the Yen in the back of traders’ minds. Remember that Japan is the largest holder of U.S. Treasuries, currently in the ballpark of over $1.2T, and an offloading of some of these holdings in order to support the Yen could push U.S. yields higher. In the context of increasing U.S. interest rate expectations, that we’ll dive into in more depth below, the situation becomes more precarious. Amid all of this, treasuries are adding to this week’s gains to start the day, with 10-year yields hanging around 4.50% and 2-year yields around 4.195%. Crude oil is weaker yet again, with nearby WTI hovering around $69.10 and nearby Brent around $72.10, both holding in relatively tight ranges this week near pre-war levels. The ags are mostly higher following yesterday’s data dump from the USDA, with fresh rumors of Chinese purchase inquiries providing tailwinds.
It’s a big week for the labor market, with a couple fresh releases this morning showing a mixed picture, but all eyes are ultimately on tomorrow morning’s June Non-Farm Payrolls report. To start, this morning’s Challenger report showed monthly layoffs in the U.S. fall to 45.849k, effectively half of the month prior and marking the lowest level for any month thus far in 2026. The tech sector saw the most job cuts yet again, with another 15.503k in June, bringing the total tech sector job cuts in the first half of 2026 to 139.156k. This means that in the first six months of 2026, the tech sector has accounted for 31.4% of all layoffs in the U.S., with Andy Challenger quoted in this morning’s report saying, “AI is the dominant force as companies are restructuring around it, automating roles, and reallocating budgets toward new capabilities.”
This was followed up with the June ADP Employment report, which showed private firms in the U.S. hire 98k workers in June, down from 122k in May and well below the expected 118k. Still, it’s worth keeping in context that if not for the previous two months that surged above 100k, this would’ve been the strongest print since January 2025. ADP’s Chief Economist Dr. Nela Richardson noted an overall effect of slower job creation, saying “we know it’s taking people longer to find work, but there are also signs of labor supply constraints in certain industries.”
The ultimate question is how this impacts Fed policy, with a resilient labor market and resurgent inflation dashing any hopes of the doves for lower rates in 2026. New Fed Chair Kevin Warsh is speaking today at the European Central Bank’s Forum on Central Banking in Portugal, with traders likely to parse through his comments carefully for indications of future direction. That may prove difficult given Warsh’s intent to overhaul the Fed’s communication strategy, with a generalized sense of “more thinking, less talking.” As shown in the graphic below courtesy of CME’s FedWatch, the market’s interest rate expectations have shifted notably higher, with odds of four 25-basis point hikes by year-end now above the odds of a single cut. The highest expectations are for a single 25-basis point hike by year’s end, coming at the September meeting, but two 25-basis point hikes are not far behind. Obviously, there’s plenty of time for change between now and then, especially in as rapidly moving an environment as we find ourselves in this year, but this will continue to sit firmly in front of the trade’s mind moving forward.
Average 30-year mortgage rates ticked down to 6.57% in the week ending June 26, off slightly from 6.59% in the week prior and marking a four-week low. The recent rise in mortgage rates has largely tracked the strength in 30-year treasury yields seen in the wake of the Iran war breaking out, hitting a recent low in the days prior to the February 28th strikes and a peak in mid-to-late May. In that span, average 30-year mortgage rates whipsawed from a nearly three-and-a-half year low of 6.09% in late February up to a nine-month high of 6.65% in mid-May. This has led to a slowdown in overall mortgage market activity, holding overall flat in the week ending June 26. Applications for new purchases rose 0.5% week-over-week but were offset by a 0.7% weekly decline in refinancing applications. It will be interesting to watch upcoming housing market data as we push into the summer months that historically bring the most seasonal strength, with 2026 so far being a generally sluggish-but-stabilizing year for the U.S. housing market.
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July 1 – Stock futures are pointing to a lower open after back-to-back days of strong gains to start the holiday-shortened week, with the major indexes all remaining within shouting distance of their most recent all-time highs. The VIX is up slightly on the day but remains low relative to recent trade, hovering around 16.8 at the time of writing. The dollar is currently trading just above 101.5, its highest level for the week thus far. Sticking in the currency markets, it’s worth pointing out that the Japanese Yen has hit another fresh 40-year low versus the dollar today after a big move yesterday, keeping lingering concerns of government intervention to support the Yen in the back of traders’ minds. Remember that Japan is the largest holder of U.S. Treasuries, currently in the ballpark of over $1.2T, and an offloading of some of these holdings in order to support the Yen could push U.S. yields higher. In the context of increasing U.S. interest rate expectations, that we’ll dive into in more depth below, the situation becomes more precarious. Amid all of this, treasuries are adding to this week’s gains to start the day, with 10-year yields hanging around 4.50% and 2-year yields around 4.195%. Crude oil is weaker yet again, with nearby WTI hovering around $69.10 and nearby Brent around $72.10, both holding in relatively tight ranges this week near pre-war levels. The ags are mostly higher following yesterday’s data dump from the USDA, with fresh rumors of Chinese purchase inquiries providing tailwinds.
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