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Perspective: Mid-Day Commentary for June 20

By: Arlan Suderman, Chief Commodities Economist

Perspective: Midday Commentary
 
Guest Commentary by Mike Castle
Market Intelligence - Senior Fertilizer Analyst

June 20 – Stocks are continuing their push higher at mid-day, with the S&P 500 and Nasdaq both reaching new all-time highs, bolstered by today’s softer than expected economic data as well as continued strength in the tech sector, specifically among chip stocks. The VIX is slightly higher on the day, though remains muted just below the 13 level. The U.S. dollar is rebounding in an attempt to wipe out early week losses, trading back above the 105 level near 105.1 at the time of writing. Treasuries are firming as well, with 10-year yields up to 4.27% and 2-year yields near 4.75%. Crude oil is in the green again, adding to a strong week as nearby WTI pushes to its highest level since the end of April, while the ags are mostly lower again. 

Today’s U.S. manufacturing data was less rosy than Tuesday’s, with the Philadelphia Fed’s Manufacturing Index falling to a reading of 1.3 in June, staying positive but missing expectations of a climb to 5.0 from May’s 4.5 reading. This was the weakest reading for the index since January but still marked the fifth consecutive month in expansionary territory, highlighting the improvement in the manufacturing sector thus far in 2024 after a bruising nearly two-year stretch. The employment portion of the index improved 5.5 points from the month prior, though remaining negative at -2.4, the eighth consecutive month in contractionary territory as signs of a softening labor market continue. One other interesting takeaway from this morning’s data was the potential sign for lingering inflationary pressures, as both the Prices Paid and Prices Received portions of the index rose in June. Additionally, expectations for prices paid and received six months from now rose to their highest levels since June 2022 and April 2022, respectively. 

U.S. crude oil stocks fell by 2.55 million barrels in the week ending 6/14, a sharper decline than the -1.98 Mb estimate. The larger than expected draw was influenced by softer supply from a dip in imports as well as a four-week low in refinery utilization of 93.5%, coupled with an uptick in exports. A similar theme played out through the rest of this morning’s data as well, with gasoline stocks falling 2.28 Mb week-on-week versus market expectations of a 0.82 Mb rise, and distillate stocks falling 1.73 Mb versus the forecasted 0.33 Mb rise. Estimated U.S. gasoline demand of 10.395 Mb was the strongest weekly level seen so far in 2024 as the summer driving season ramps up. Elsewhere, U.S. propane stocks rose 1.64 Mb on softer demand, but a dip in production led to a smaller increase than the expected 2.2 Mb build. 

With AI mania still in full swing on Wall Street, Nvidia has officially become the most valuable company on earth in terms of market cap, surpassing Microsoft to end the day Tuesday and maintaining that title today as the stock pushes to yet another fresh all-time high. After Nvidia’s stock price more than tripled in 2023, it has nearly tripled again year-to-date through less than half of 2024 to approach a market cap not terribly far from $3.5 trillion. Nvidia has been far from the only beneficiary of the market’s AI craze, with other chipmakers and the broader tech sector all benefitting. Despite cracks starting to show in many sectors of the U.S. economy in recent months, optimism regarding the potential for AI has played a major role in allowing the broader stock market to keep chugging along and reach record territory. 
 

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