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Perspective: Morning Commentary for September 30

By: Mike Castle, Market Intelligence - Fertilizer Analyst

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September 30 – A tranche of market-moving data is on tap throughout the day, with the timing of month-end and quarter-end setting the stage for a potential volatile day of trade. This morning delivered about the best possible macro mix: materially stronger underlying U.S. economic growth and continued labor-market resilience, paired with softer-than-expected inflation—also coming in the form of the Fed’s preferred inflation metric, no less. In turn, stock futures are pointing to a stronger open while the VIX cools, breaking sharply lower post-release and sitting around 15.8 at the time of writing. The dollar has also reversed course to move lower as the market begins factoring in less need for immediate rate hikes from the Fed, down slightly over 0.2% on the day to trade near 101.15 at the time of writing. Treasury yields are moving notably lower post-release as well, particularly at the front-end of the curve where the Fed has more control, with 2-year yields back down to 4.83%, 10-year yields at 5.22%, and 30-year yields at 5.58%. Crude oil is attempting to stop the recent slide, with nearby WTI up 2% to trade near $90.70 and nearby Brent up 1.4% to trade near $97.50. The ags are mostly higher to start the day, with all eyes on today’s Quarterly Grain Stocks and Small Grain Summary reports due out at 11:00 AM Central Time.

This morning’s ADP employment report blew past expectations, with private businesses hiring 90k workers in September, handily beating the average analyst estimate of 70k and matching the highest estimate. This represents a notably sharp rebound from the dip to 36k in August, which was revised slightly lower from the originally reported 38k, and representing the best print for the metric since June. The strength was relatively broad, with the biggest gains seen in education and health services (+55k), followed by leisure and hospitality (+22k), manufacturing (+17k), and construction (+15k). The biggest weakness was seen in the financial activities sector (-16k) and professional and business services (-11k), while natural resources and mining (-1k) was the only other category to see a monthly decline. Overall, this morning’s report suggests renewed resilience in the U.S. labor market into September, taking some of the sting out of yesterday's disappointing headline job openings figure on the August JOLTs report. For the markets, however, the strength in the U.S. labor market could be seen as another permission signal for the Fed to continue on their hiking path.

U.S. economic growth also blew past expectations, with Q2 GDP revised up to 2.2% from the 1.5% initial estimate, while Q1 was also moved notably higher to show 2.5% growth versus the 1.5% previously reported. The upward GDP revision wasn’t primarily a statistical boost from inventories or trade—it reflected much stronger household consumption and business investment, with underlying private domestic demand running considerably hotter than the 2.2% headline suggests. Real consumer spending rose 3.8% quarter-on-quarter in Q2, up from the already impressive 3.4% previously reported and marking the strongest quarterly increase since Q4 of 2024. Sticking with the theme of strength in U.S. consumer spending, inflation adjusted personal spending was up 0.6% month-on-month in August, a notable acceleration from the 0.1% rise in July and marking the sharpest rate of growth since March 2025.

August headline PCE came in slightly cooler than expected, showing a 3.4% year-on-year and 0.3% month-on-month rise, both below their respective average analyst estimates of 3.7% and 0.4%, respectively. Even more positively, July data was revised slightly lower, now showing a 3.4% year-on-year gain versus the 3.7% previously reported. Stripping out the more volatile food and energy sectors, core PCE rose 3.0% year-on-year and 0.2% month-on-month, also coming in below the estimates of 3.3% and 0.3%, respectively. As with the headline figures, July core PCE saw downward revisions as well, now showing a 3.0% yearly gain and 0.1% monthly gain. Obviously, this remains well above the Fed’s 2.0% mandate but represents a clear sigh of relief for the market fearing a resurgence of inflation. Given the ongoing build-up in inflationary pressures at the producer level, the fear of higher inflation and thus higher rates moving forward remains in place, but today’s print should soften the current hawkishness to some extent. Coupled with New York Fed President John Williams’ comments yesterday that after the September hike “there is no need for urgency,” the market will likely be shifting expectations toward the Fed holding steady in October, moving the focus back to the December meeting as well as what lies ahead in 2027.

The recent surge in Treasury yields have pushed average 30-year mortgage rates to a nearly three-year high, rising to 7.30% in the week ended September 25 from 7.12% the week prior and marking the highest level seen since November 2023. This was an 18-basis point week-on-week increase, the sharpest weekly gain since April 2025. Total mortgage applications fell 6.0% week-on-week in response, marking the sharpest weekly decline since July and pushing the Mortgage Bankers Association’s (MBA) combined Mortgage Market Index to its lowest level since February 2025. As could be expected, the headline weakness was again driven more heavily by the 8.7% weekly decline in refinancing applications, though new purchase applications saw their sharpest weekly decline since early July, falling 4.3%. This also represents a low for MBA’s index for new purchases to a new low since April 2025.  

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Perspective: Morning Commentary for September 30

September 30 – A tranche of market-moving data is on tap throughout the day, with the timing of month-end and quarter-end setting the stage for a potential volatile day of trade. This morning delivered about the best possible macro mix: materially stronger underlying U.S. economic growth and continued labor-market resilience, paired with softer-than-expected inflation—also coming in the form of the Fed’s preferred inflation metric, no less. In turn, stock futures are pointing to a stronger open while the VIX cools, breaking sharply lower post-release and sitting around 15.8 at the time of writing. The dollar has also reversed course to move lower as the market begins factoring in less need for immediate rate hikes from the Fed, down slightly over 0.2% on the day to trade near 101.15 at the time of writing. Treasury yields are moving notably lower post-release as well, particularly at the front-end of the curve where the Fed has more control, with 2-year yields back down to 4.83%, 10-year yields at 5.22%, and 30-year yields at 5.58%. Crude oil is attempting to stop the recent slide, with nearby WTI up 2% to trade near $90.70 and nearby Brent up 1.4% to trade near $97.50. The ags are mostly higher to start the day, with all eyes on today’s Quarterly Grain Stocks and Small Grain Summary reports due out at 11:00 AM Central Time.

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