February 19 – Stocks have battled back from lows this morning as the S&P 500 moves narrowly into the green at mid-day, while the Nasdaq and Dow Jones remain slightly in the red and the VIX hovers around the 15.6 level. The U.S. dollar is continuing its push higher this week, though still well off January’s highs as it trades near 107.25 at the time of writing. Treasuries are mixed at mid-day, with 10-year yields clinging to very slight gains above the 4.55% level while 2-year yields dip below 4.29%. Crude oil is up nearly 1% today, adding to yesterday’s gains following the Ukrainian attack on a CPC pumping station, as the nearby WTI contract hangs around $72.50/barrel. The ags are largely mixed, with corn and beans clinging to small gains while the wheat complex sells off.
Average 30-year mortgage rates in the U.S. fell to their lowest level of 2025 at 6.93% in the week ending 2/14, down from 6.95% the week prior and more sharply from the recent 7.09% peak seen in early January. This coincided with the sharpest weekly decline in composite mortgage applications seen in 2025 as well at -6.6%, reversing course from the small gains seen in the two weeks prior. While housing starts in January saw their worst monthly decline (-9.8%) since March 2024, some of that negativity may have been a result of the poor weather seen across much of the U.S. during the month, making it interesting to see if we rebound in February (though the weather hasn’t exactly been cooperating this month either). It also adds more interest to Friday’s upcoming January Existing Home Sales release to get a clearer picture of the health of the U.S. housing market.
Traders will get to parse through the minutes of the FOMC’s January meeting when they’re released this afternoon, while also hearing from Vice Chair Philip Jefferson later in the day. This was the first Fed meeting since the new administration took office, so it will be interesting to get more detail on the discussions regarding how they plan to react to new policy initiatives. Fed Chair Jerome Powell emphasized the uncertainty of the current environment in his press conference following the meeting, noting that “the range of possibilities is very, very wide” in regard to the impact of potential tariffs, while also noting that the Fed was in “no hurry” to adjust its policy stance with the U.S. economy remaining strong. However, the rapid pace of market influencing headlines in the weeks since this meeting, along with some hotter than expected inflation data, may make some of its information relatively stale. The FOMC won’t be meeting again until March 18-19th, but expectations are for an uneventful one, with the market pricing in 97.5% odds of rates being held steady. In fact, the market is now pricing in expectations for the Fed to only make one 25 basis point rate cut in the remainder of 2025, showing that cut coming at their late July meeting.
While 2025 has brought us a tremendous amount of uncertainty, it’s also brought us something we didn’t see in all of 2024: $5 spot corn futures. In fact, yesterday’s March ’25 contract close of $5.02 was the first time nearby corn has closed above the $5 mark since October 2023. USDA’s unexpectedly sharp reductions to U.S. ending stocks on their January report, coupled with South American weather issues that have done damage to Argentina’s developing crop and slightly delayed the planting of Brazil’s 2nd crop have allowed prices to gradually trend upward over the past month-plus. Some of those weather concerns have eased, with large swaths of previously dry Argentine production seeing good rains in the last couple weeks and forecasts calling for more, though some areas continue to miss out entirely; Brazilian corn planting looks to be catching up nicely as well, albeit still behind for now. At the same time though, the U.S. balance sheet is expected to tighten further due to strong export and ethanol demand. The bottom line is there is still plenty of risk and uncertainty ahead, though today’s close could be pivotal to the current rally if we fail to hold above that technically and psychologically important $5 mark.
