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Perspective: Morning Commentary for April 2

By: Arlan Suderman, Chief Commodities Economist

Perspective: Morning Commentary
 
Arlan Suderman
Chief Commodities Economist

 

Guest Commentary by Matt Zeller, Senior Market Intelligence Analyst

 

April 2 – Dow Jones futures are indicating another decline today after a weak start to the month of April, with investors taking some profits following the run-up to record highs around the end of the first quarter. Health insurer shares are under pressure this morning after the government declined to boost payments for private medicare plans – steady Medicare Advantage rates in 2025 follow only one similar hold in the last decade, with the trade having come to expect increases in final rates. Equities traders are also starting to face the fact that interest rate cuts could be further off than consistently expected. All that being said, the benchmark DJIA remains only a few hundred points from recent record highs as well as that psychological 40k-point mark.

 

More economic data is on tap later this morning, including factory and durable goods orders for the month of February, following generally positive manufacturing and construction spending numbers yesterday. Small month-over-month gains are expected in those orders numbers today, more indication of a resilient economy in the face of “elevated” interest rates. The CME FedWatch tool is still indicating trade estimates for the first 25-basis-point rate cut in June or July, followed by another one or two similar reductions by the end of the calendar year, but the reality is that inflation continues to trend closer to 3% than the 2% area that the central bank is looking for.

 

WTI crude oil pushed above the $85 per barrel mark this morning for the first time since October; a missile strike in Syria was the latest piece of news to push crush crude higher yesterday, and Ukrainian drones hit Russia’s third-largest refiner this morning. Geopolitical premium continues to build along with the ongoing support from OPEC+ supply cuts, and the group is expected to re-affirm their policy in a review meeting scheduled for tomorrow. U.S. national average gas prices are up 16 cents from a month ago and are threatening to put a dent into consumer spending readings and hit corresponding stocks tied to them, as we head into the summer months.

 

The nation’s winter wheat crop is in its best shape at this point in the last five years, according to the USDA, which issued their initial spring Crop Progress Report yesterday afternoon. 56% of the crop was rated good or excellent, up from 50% g/ex in the last fall report, double last year’s figure, and tied for the second-best of the last 12 seasons. Both the other two years rated 56% g/ex or better at this point (2015/16 and 2018/19) went on to finish out the year rated a solid 60% g/ex or better. Good rains and overall precipitation continue to aid moisture supplies across the country, still with some work to do to wipe out lingering drought conditions in the heart of the Plains and Midwest, but the wet pattern continues for at least the next week. Moreover, those rains are starting to dry up a bit now for the 11-15 day forecasts, which along with above-normal temps could work out just in time for early Midwest corn planting. A lack of threat to speedy planting would only provide further fuel for the grain market bears…

 

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