By: Mike Castle, Market Intelligence - Fertilizer Analyst
September 4 – Stocks have turned mixed into midday, with the Nasdaq breaking into the green while the Dow Jones and S&P 500 remain in the red. The VIX has cooled steadily over the last two hours, trading below 14 at the time of writing, a level not previously seen in 2026. The dollar has fallen from its highs but remains up 0.1% on the day, trading above 99.10 at midday. The treasury yield curve is flattening today after the strong labor data released this morning, with 2-year yields still up notably to trade at 4.37%, 10-year yields up only slightly now at 4.77%, and 30-year yields slightly lower to trade back below 5.24%.
The broader commodity sector is seeing notable selling pressure to end the week, with some of the speculative net length built up likely being offloaded ahead of a three-day market closure that is expected to see a potential resumption of negotiations between Russia and Ukraine. Nearby WTI crude oil is down 0.7% to trade near $91 while nearby Brent is up 0.1% to trade near $95.60 at the time of writing. The grains and oilseeds are widely lower amid the potential for a renewal of flow through the Black Sea, again likely being exacerbated by the big fund longs. Wheat continues to be the main focus, but it’s interesting to note that Turkey announced a purchase tender for 12,000 metric tons of sunflower oil today, with a deadline for offers of next Thursday (9/10). We’ll see what, if any, impact this weekend’s talks have on participation in this tender. It also acts as a good reminder that movement through the Black Sea is not just a wheat story, but also an edible oil, feed grain, and energy story.
Sticking with the theme of labor ahead of the long weekend in the U.S., this morning’s data carried plenty of additional signs of strength in the details. While the headline unemployment rate held steady at 4.1%, the broader U-6 unemployment rate that captures the unemployed as well as marginally attached workers and those working part-time for economic reasons fell 0.2% month-on-month to sit at 7.7% in August. That is the lowest level seen since June 2025, sharply off the recent peak seen back in November at 8.7%. Additionally, the average workweek for all U.S. employees on private non-farm payrolls rose to 34.4 hours in August, above analyst estimates and representing the highest reading since March 2024. Overall, the August employment report delivered one of the most constructive looks at the health of the U.S. labor market seen thus far in 2026, with stronger payroll growth, positive revisions, rising participation, and a notable decline in broader measures of labor underutilization.
Markets interpreted the surprisingly strong employment report as giving the Fed greater latitude to raise rates to fight against persistent inflation, with treasury yields and rate expectations immediately rising in response. However, President Trump took the opposite view—arguing that the economy’s resilience demonstrates that high interest rates are unnecessary and are instead putting the U.S. at a competitive disadvantage. Enter the political pressure that complicates the picture. Despite the notable improvement seen in inflation metrics in June and July, all remain meaningfully above the Fed’s stated 2.0% mandate, as they have now for five-plus years. Kevin Warsh has used his public comments to continuously reiterate the Fed’s commitment to that mandate, but we have yet to see a move in the Fed’s target rate thus far in his short tenure. A resilient labor market would give the Fed permission to move rates higher at the September meeting if upcoming August inflation data does not show continued improvement, but that political pressure to maintain lower rates looms in the background. CME’s FedWatch yesterday showed essentially a coin flip slightly favoring rates being held steady at the September meeting but now show above 60% odds of a 25-basis point hike. Even the more dovish comments we heard from Fed Governor Christopher Waller yesterday were accompanied by the warning that he would consider a rate hike if August inflation data came in hot. That adds additional pressure to next Thursday and Friday’s inflation data releases, setting the stage for potentially elevated volatility across the rates market and, subsequently, broader financial markets as investors reassess the Fed’s near-term policy path.
Trump’s post was also accompanied by the quote: “lower the rate or I’ll stop trading with countries with which we have a deficit.” Markets have thus far largely looked through this threat, instead remaining focused on the report’s hawkish implications for Fed policy. The proposed linkage is also difficult to reconcile economically, as broad trade restrictions and a re-shuffling of flows could raise import costs and exacerbate inflation, the very condition currently limiting the Fed’s ability to lower rates. Again, August inflation data will likely be the biggest variable influencing the Fed’s September decision.
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September 4 – Stocks have turned mixed into midday, with the Nasdaq breaking into the green while the Dow Jones and S&P 500 remain in the red. The VIX has cooled steadily over the last two hours, trading below 14 at the time of writing, a level not previously seen in 2026. The dollar has fallen from its highs but remains up 0.1% on the day, trading above 99.10 at midday. The treasury yield curve is flattening today after the strong labor data released this morning, with 2-year yields still up notably to trade at 4.37%, 10-year yields up only slightly now at 4.77%, and 30-year yields slightly lower to trade back below 5.24%.
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