May 1 – It’s “May Day” or “Labor Day” or something similar across much of the world, but it’s another day of work here in the United States, where we turn the calendar to a new month. Stock futures pushed cautiously higher overnight as Wall Street adjusts to the new tariff world that we live in, with the major stock indices now not that far from where they were on April 2nd when the reciprocal tariffs were announced. The data hasn’t been that bad thus far, although we’re just now getting into the period when we’re going to start seeing hard data on the impact of the tariff war, and the markets will have to digest that as it comes. The VIX is trading near 24 this morning, marking its lowest level since April 2nd. The dollar index is trading near 99.9, which is still well below where we were at the first of the month. Yields on 10-year Treasuries are trading near 4.15%, which is close to the levels of April 2nd, while yields on 2-year Treasuries are trading near 3.57%, which is well below where we were on April 2nd. Crude oil prices are trading near $58 per barrel this morning, or about $13 below its level on April 2nd, while the grain and oilseed markets were generally firm to higher overnight. Soybeans are trading near their April 2nd levels, while corn prices are higher, and wheat prices are lower – but these are all more reflective of their current supply and demand fundamentals apart from tariffs.
First-time claims for unemployment benefits jumped to 241K in the week ending April 26, far exceeding analyst expectations of 221K, and above the 223K claims filed the previous week. This raised the four-week moving average to 226K claims, up from 220.5K the previous week. The highest increases in weekly claims came from New Jersey (+2,875), Connecticut (+2,231), and Rhode Island (+1,868). Continuing claims for the week ending April 19 jumped by 83K to 1.916 million, which was its highest level since November 13, 2021. The four-week moving average for continuing claims rose by 5,750 to 1.868 million. Continuing claims have jumped around considerably over the past couple of months, but today’s increase will cause analysts to take notice. Initial claims for benefits by former Federal civilian employees in the week ending April 19 totaled 470, which was down 187 from the previous week. Continuing claims in the week ending April 12 that were filed by former Federal civilian employees totaled 6,634, down 391 from the previous week.
Today’s Challenger Job Cut Report reflected corporate announcements of potential layoffs given in April at 105,441. That’s a significantly higher number than what we’ve seen in recent history post-pandemic, but it’s notably lower than the 275,240 posted for March. These announcements are a product of corporations following the law to give notice ahead of time of potential layoffs, and they did so in big numbers in March due to the uncertainty of the anticipated reciprocal tariff announcements that were made on April 2nd. The announced potential layoffs in April following the tariff implementation were still elevated, but they reflect a bit of easing concern, rather than escalation.
China has completed its “white” list of products exempt from its 125% retaliatory tariff, according to Reuters. The list remains a state secret, although unnamed sources confirmed its presence to Reuters. China continues to maintain a strong public stance of “standing up to the bully” to sustain support at home, while also trying to encourage other countries to do the same, as indicated in my comments yesterday about China’s recently released video. However, it is quietly exempting products that it “needs” to import from the United States to minimize the impact on its citizens. Instead, it quietly notifies suppliers to tell them that their products have been exempted. One source told Reuters that some U.S. suppliers had been encouraged by Chinese authorities to inquire whether their products could be exempted, suggesting that the list could still grow going forward.
China similarly exempted U.S. soybeans from the retaliatory tariffs during Trump 1.0 when it needed to import them, although it is still unclear whether it will do so this time. USDA expects that China’s surplus soybean stocks at the end of the current marketing year will total 44 million metric tons, which would be nearly twice the total that it purchased from the United States in the current marketing year. As such, it could totally cut off soybean purchases if it so chose. But we also know that China’s state grain buying agency – Sinograin – has continued to take U.S. soybeans to put into China’s reserve supplies. Those purchases are essentially immune to the retaliatory tariffs, and they can later be auctioned off to crushers as they have need.
End of the month profit taking lifted wheat and corn prices yesterday, although the previous day’s selling also provided a nice opportunity for end users to extend coverage as well. Some of that strength carried over into overnight trade as we enter the new month of trade today. However, corn and wheat prices are also facing pressure from weather that is currently seen as nearly ideal for significant areas of production in the United States.
