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Perspective: Mid-Day Commentary for October 15

Mike Castle
Mike Castle

Market Intelligence - Fertilizer Analyst

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October 15 – An ugly tech sector selloff is pushing the Nasdaq down 0.6% at midday, though money is rotating into other sectors of the equities as the Dow Jones (+0.8%) and S&P 500 (+0.2%) push higher. The VIX touched 18 for the first time in a month earlier this morning but has since cooled to hang near 16.7 at the time of writing. The dollar remains in the red as it trades near 102.15, down close to 0.4% on the day, down sharply from yesterday’s 18-month high near 103. Treasury yields remain sharply lower on the day, particularly at the long-end of the curve, with 2-year yields down roughly 4 basis points to sit near 4.76%, 10-year yields down nearly 10 basis points to hang below 5.10%, and 30-year yields also down nearly 10 basis points to trade below 5.43%. The ags are largely mixed at midday, with the wheat complex finding fresh support from renewed Russian strikes on vessels in the Black Sea, this time within Romanian territorial waters, while soybeans are selling off after the recently released September NOPA Crush report showing monthly U.S. soy crush tank to a 13-month low at 196.3 million bushels, well below the expected 203.7 million. Despite back-to-back days of sizable USDA flash sales of soybeans to China and unknown destinations, the weak start to the 2026/27 marketing year on the domestic side of the demand picture takes some of the wind out of the proverbial sails as we’ll now need to play catch-up in the months ahead.

WTI crude oil prices have reversed course to surge higher into midday, now up 3.2% to trade above $98.20 at the time of writing, a four-week high. Further escalation in the Middle East and renewed Ukrainian strikes on Russian energy targets adds in additional risk premium on the international front, while the bigger story came here in the states with a surprisingly bullish D.O.E. report. U.S. crude oil stocks unexpectedly fell 8.557 million barrels week-on-week, much sharper than the expected 0.288-million-barrel draw and representing the sharpest weekly decline seen since February. This pushed total U.S. crude oil stocks excluding the SPR down to 415.58 million barrels, the lowest level since late July. Weekly crude oil production fell to its lowest level in months at 13.679 million barrels, while imports dropped 791k barrels week-on-week, leading to a major drop in supply. On the demand side, refinery utilization rebounded 0.8% week-on-week to sit at 93.5%, with refinery inputs of 16.615 million barrels marking a three-week high. On the refined product side, gasoline stocks saw a shockingly large 3.518 million barrel week-on-week build, defying expectations of a 0.489 million barrel draw, while distillate stocks fell 2.527 million barrels week-on-week, nearly one million more than expected, keeping diesel supply in focus.

Headline U.S. retail sales surged 0.8% month-on-month in September, blowing past expectations of a moderation to a 0.3% rise, while August was revised higher to show a 1.3% month-on-month uptick, still the highest since March. In year-on-year terms, September retail sales were up 6.3%, an acceleration from 5.6% in August. The headline strength looks massive, but this was driven largely by the sharp rise in gasoline prices, with sales at gasoline stations leading the way by far, up 6.4% month-on-month. There was notable strength in other sectors too, with furniture up 1.3% month-on-month, restaurants & bars up 1.1%, health & personal care up 0.7%, and electronics & appliances up 0.6%. Stripping out the pressure from high gas prices, however, U.S. retail sales excluding gas and autos rose only 0.2% month-on-month, a notable slowdown from the 1.1% rise in the previous month. Declines were seen in miscellaneous retailers (-3.0%), building materials (-0.6%), sporting goods/books/hobbies (-0.5%), and general merchandise (-0.1%).

Tying today’s data to the actual impact on U.S. economic growth, the GDP-relevant retail sales control group rose only 0.1% month-on-month in September, suggesting underlying consumer demand was notably weaker than the headline figure implies. This is the measure that most closely aligns with the PCE component that feeds into quarterly GDP calculations; it excludes gasoline stations, autos, building materials, and restaurants & bars. That suggests a softer contribution to U.S. GDP growth—again, something that sounds like bad news on the surface, but may give the doves a glimmer of hope as any perceived weakness could be taken as a signal to the Fed to slow their pace of hiking. That could also help explain the recovery seen in the equities into midday as cooler heads prevail once the details are parsed through, rather than simply reacting to the headline print.

U.S. Energy Secretary Chris Wright said the administration is considering easing sanctions on shadow fleet vessels in an attempt to reduce record-high freight rates caused by the ongoing disruptions to global energy shipping, particularly in the Middle East. Such vessels have historically been used to skirt sanctions on energy products from Iran, Russia, and Venezuela, although the current proposal would reportedly only authorize previously sanctioned vessels to transport oil and petroleum products that are not themselves sanctioned. Given the ongoing U.S. blockade of Iran and substantial American influence over Venezuelan crude exports, Russia could stand to benefit from any broader easing of sanctions enforcement, particularly alongside the recent measures attempting to facilitate exports of Russian diesel. Policing what these vessels are ultimately used for has proven incredibly difficult, however, as the shadow fleet market has become very efficient in its intended opacity, providing critical energy export revenue to heavily sanctioned nations in recent years. The U.S. continues to look for ways to improve the flow of global energy products in an attempt to lower fuel prices ahead of the midterm elections, but the market remains skeptical that such measures will lead to a material improvement in freight rates over such a short timeframe. The longer-term question that will ultimately need to be answered is whether such measures inadvertently weaken sanctions enforcement and ultimately provide additional financial support to Russia and Iran, potentially prolonging the ongoing conflicts in both theaters.

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October 15 – An ugly tech sector selloff is pushing the Nasdaq down 0.6% at midday, though money is rotating into other sectors of the equities as the Dow Jones (+0.8%) and S&P 500 (+0.2%) push higher. The VIX touched 18 for the first time in a month earlier this morning but has since cooled to hang near 16.7 at the time of writing. The dollar remains in the red as it trades near 102.15, down close to 0.4% on the day, down sharply from yesterday’s 18-month high near 103. Treasury yields remain sharply lower on the day, particularly at the long-end of the curve, with 2-year yields down roughly 4 basis points to sit near 4.76%, 10-year yields down nearly 10 basis points to hang below 5.10%, and 30-year yields also down nearly 10 basis points to trade below 5.43%. The ags are largely mixed at midday, with the wheat complex finding fresh support from renewed Russian strikes on vessels in the Black Sea, this time within Romanian territorial waters, while soybeans are selling off after the recently released September NOPA Crush report showing monthly U.S. soy crush tank to a 13-month low at 196.3 million bushels, well below the expected 203.7 million. Despite back-to-back days of sizable USDA flash sales of soybeans to China and unknown destinations, the weak start to the 2026/27 marketing year on the domestic side of the demand picture takes some of the wind out of the proverbial sails as we’ll now need to play catch-up in the months ahead.

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