Perspective: Morning Commentary for May 1

By: Arlan Suderman, Chief Commodities Economist

Mon, 01 May 2023, 13:29

Perspective: Morning Commentary

Arlan Suderman

Chief Commodities Economist

May 1 – It’s Fed Week on Wall Street. That will occupy the primary focus of traders until at least Wednesday afternoon, when traders are finally able to hear more about the longer-term intentions of the central bank. The VIX fell to a nearly 18-month low below 16 on Friday, and it continues to trade just above that level this morning as the trade feels increasingly confident that they know what the Federal Reserve is going to say on Wednesday, and they have come to accept that. The dollar is trading near 101.7 this morning. Yields on 10-year Treasuries are trading near 3.47%, while yields on 2-year Treasuries are trading near 4.09%. Crude oil prices are nearly 2% lower this morning, while the grain and oilseed markets were mostly lower overnight.

Wall Street fully expects one more rate hike from the Fed this week, followed by a pause, before seeing a couple of rate cuts later this fall. In other words, Wall Street is convinced that we will see a pivot this year, with the last of the rate hikes coming this week. Fed fund futures this morning put 92% odds of a 25-basis-point rate hike on Wednesday of this week. Wall Street may finally be right, after being wrong for much of the past 15 months, although several risks remain in place that could still give us additional rate hikes. To me, the bigger question is the timing of the first rate cut. Keep in mind that this Fed has discussed at length the negative implications of a premature rate cut back in 1980 that it considers in hindsight to have been a major mistake. That premature rate cut in 1980 necessitated aggressive rate hikes later in the same year, pushing rates upward toward 22% briefly, to bring inflation back under control.

The whole point of the rate hikes is to inflict sufficient pain on the economy for long enough to bring the core reasons for inflation under control sufficiently to bring the overall inflation rate down to the 2% mandated level. I do not believe that the Fed has yet done that, nor do I believe that most Fed members believe that they have done that. I’ve already mentioned the wage inflation challenge, but another challenge is the housing market, which is showing signs of recovering. Home prices make up more than 40% of the CPI basket, which would increase the stickiness of inflation if housing demand continued to recover. Hitting the 2% mandate may not mean additional rate hikes, although that is still possible, but it does likely mean holding rates for longer than the market currently anticipates. We should soon start to see the unemployment rate start to tick higher, which is a necessary component for taming wage inflation, but the amount of stimulus still in the economy leaves it vulnerable to a quick rebound if the Fed takes its foot off the brakes too quickly.

Today is Labor Day in China, with the resulting holiday continuing through Wednesday. It’s a critical time to assess consumer behavior in measuring the return of China’s economy post-Covid. But the holiday doesn’t alter the growing tension that is building between China and the United States. China continues to press to move much of the world away from the dollar to remove what it believes to be one of the primary leverages of power that the United States has, which also says something about the power it believes it could have if the yuan would become the primary currency of trade. Meanwhile, the United States continues to press the issue of Taiwan independence, which China sees as a threat to its sovereignty.

Ukraine grain exports in April totaled 3.62 million metric tons, or roughly half their capacity due to increasing challenges to move it over land or sea. Yet, the market currently doesn’t care, as there are no headlines of shortages at this point. Grain and oilseed prices are somewhat vulnerable to headline risk with the Fed meeting on Wednesday, but the primary focus will likely remain on the supply and demand fundamentals for the 2023-24 crop marketing year over the next two weeks.

USDA is scheduled to issue its first balance sheets for the next marketing year on May 12th. Traders expect it to show expanding corn and soybean balance sheets in the year ahead, and possibly to show significant expansion beyond that if the anticipated El Nino growing season results in above-trend yields. That’s the sentiment that we will likely continue to see traded over the next couple of weeks, with the planting window opening across the Midwest. Water levels are coming down over much of the northern Red River Valley, with the cresting waters moderating on the Mississippi as they flow south. Much of this has already been priced into the market, but there’s currently not a headline to flip the momentum higher, leaving “oversold” as the only reason for market bounces. Wall Street may be pricing in an economic recovery, but the commodity market is currently focused on anticipated lost demand in the future anticipated recession. That sentiment will change one day, although the timing is yet to be determined. I’m monitoring the crude oil market for a sentiment change, as that is where I expect to see the first signs of a change. Crude oil demand is the first to show lost demand in a slowing economy, and it should be the first to see a flip in the fundamentals as the economy recovers as well. Grain and oilseed traders will trade their own fundamentals, but within the context of what they too see in the crude oil market.

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Perspective: Morning Commentary for August 6

August 6 – This morning’s stronger-than-expected U.S. labor data offered markets some relief, reinforcing confidence in the economy while giving the Fed greater flexibility to raise rates should inflationary pressures reaccelerate in next week’s July data. Stock futures are pointing to a mixed open to start the day, with the tech-heavy Nasdaq showing the most weakness. The VIX has fallen notably from yesterday’s spike above 18.4 as it starts the day hovering just below the 16-mark. The dollar is quietly higher as it trades just above 99.8, holding in the tight range seen thus far this week as traders continue to digest data to shape expectations for the Fed’s next move, which we’ll dive into in more depth below. Long-term treasury yields have relaxed slightly from their recent spike, with 30-year yields starting the day trading just above 5.19%, while 10-year yields trade above 4.64%, and 2-year yields sit below 4.22%. Crude oil is modestly higher to start the session after sharp declines earlier in the week, with nearby WTI up 1.8% to trade at $76.40 and nearby Brent up 2.4% to trade at $81.40. Meanwhile, the ags are quietly mixed to start the day.

Mike CastleThu, 06 Aug 2026, 13:24

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Perspective: Morning Commentary for August 5

August 5 – U.S. equities markets are on fire this week, with both the Dow Jones and S&P 500 setting new all-time highs yesterday with futures indicating further gains again today; the marketplace remains optimistic over a deal with Iran despite no evidence of such as of yet. Crude oil is working on a lower high and low today but remains slightly on the high side on the session, while the dollar is retreating back towards Monday’s nearly two-month low. The ten-year note is steady-to-lower this morning (though solidly lower so far this month) at 4.605%, while the VIX index continues to rebound into mid-week at almost a 17-point reading this morning.

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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