Perspective: Morning Commentary for January 18

By: Arlan Suderman, Chief Commodities Economist

Wed, 18 Jan 2023, 14:34

Perspective: Morning Commentary

Arlan Suderman

Chief Commodities Economist

January 18 – Stock futures are cautiously higher this morning following a couple of key economic reports that raise hopes of a policy pivot by the Federal Reserve, with retail sales coming in worse than expected and inflation better than expected. The VIX is trading below 19 in early trade this morning, while the dollar index is trading near 101.6, or just above its seven-month lows. Yields on 10-year Treasuries fell notably following this morning’s data release, and they are now trading at four-month lows near 3.38%, while yields on 2-year Treasuries are trading near 4.08%. Crude oil prices are more than 2% higher on further evidence of a rebound in China’s economy, while the grain and oilseed markets were mixed in early trade.

The producer price index fell 0.5% month-on-month in December, down from 0.3% gains the previous month and lower than the 0.1% decline expected by analysts. The PPI was up 6.2% year-on-year in December, down from 7.4% in November and below analyst expectations of 6.8%. Core PPI that excludes the more volatile food and energy sectors rose 0.1% month-on-month in December, matching analyst expectations, although down from 0.4% gains the previous month. Core PPI was up 5.5% year-on-year in December, down from 6.2% year-on-year and below analyst expectations of 5.6%. Once again, declining energy prices are one of the primary reasons for the improving inflation numbers, similar to what we’ve seen with the consumer price data.

Retail sales fell 1.1% month-on-month in December, which was worse than the 0.8% decline expected by analysts. Furthermore, the November data was revised to show a 1.0% decline in retail sales, which was worse than the 0.6% decline originally reported. Retail sales minus vehicles also fell 1.1% month-on-month in December, more than doubling the 0.5% decline expected by analysts. The November data here too was revised to a 0.6% decline, down from the 0.2% decline first reported. Retail sales minus vehicles and gas fell 0.7% month-on-month, which was worse than the 0.1% decline expected. Retail sales minus vehicles and gas for November was revised to a 0.5% decline, versus the 0.2% decline previously reported.

The bottom line in the eyes of traders is, how will members of the Federal Reserve interpret this data? The inflation data raises hopes of peak inflation being behind us, although it still reflects some areas of the economy where inflation is deeply engrained, with risks of rising again if energy prices rebound. The retail sales data reflect the low levels of consumer sentiment late in 2022. A decline in consumer spending results in lower retail sales, which results in a reduced need to producer products and services. That in turn should reduce employment to bring wage inflation under control, which is a necessary component of taming overall inflation. We’ve seen very little evidence yet of slowing wage inflation other than one data point in the monthly jobs report, although the retail sales data suggests that we may be seeing early signs of the slowdown needed to positively impact wage inflation. It should be noted that consumer sentiment has started to rise again. As such, I expect that Fed members will acknowledge the above, while still warning of the need to stay the course until wage inflation has been brought down.

Is this the beginning of the end for the painful monetary tightening policy cycle? Perhaps, but I believe the process of pivoting will take longer than the market expects. StoneX’s Josh Cannington highlighted a statement from Gentrust of interest last week. Looking back at CPI data since 1914, there were 8 times the CPI started below 2.50%, rose about 5% and then went back below 2.5%. The average number of months that cycle lasted was 48 months. The two most recent episodes (1972 – 1983 and 1987 – 1993) lasted 131 and 82 months respectively. Today we are in month 20. Josh went on to say, “In simpler words. . . inflation has a long way to go and will likely have a bumpy ride down. If so, the Fed will hold true to the message of holding rates higher for longer and the market will need to reset those rate cut expectations over time – leading to upward pressure on 2 – 3Y rates in the first half of 2023.” I would add one of the keys will be whether we see a return of commodity inflation in 2023 or not.

Corn and soybean prices rebounded on Tuesday, challenging their late December highs late in the session. That buying interest dried up early this morning. Today’s action should give us a feel for the conviction of the bulls. USDA’s crop report on Thursday re-emphasized the general tightness of grain and oilseed supplies, but the bulls need a real threat to those tight supplies. They pointed to the Argentine drought as that threat, but Brazil’s crops look quite good currently, and rain chances are improving for Argentina. A weaker dollar should provide support.

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Perspective: Morning Commentary for August 7

August 7 – The U.S. economy unexpectedly lost 23k jobs in July, dramatically below market expectations of an 80k increase and marking the worst Non-Farm Payrolls print since February. Furthermore, May and June were both revised sharply downward, with combined revisions showing 103k fewer jobs than previously reported. Outside of the healthcare sector, which added 22k jobs in July, the losses were very broad-based. Government payrolls saw the largest decline, shedding 53k jobs in July, the largest seen since October 2025, while June was revised down to show a loss of 10k jobs as well. The private sector at least saw growth, adding 30k jobs in July, now matching the month prior after it was revised down from the 49k initially reported, and substantially missing forecasts of 78k jobs being added. This is a sharp reversal in course from the largely better than expected U.S. labor data seen earlier this week.

Mike CastleFri, 07 Aug 2026, 13:26

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Perspective: Morning Commentary for August 6

August 6 – This morning’s stronger-than-expected U.S. labor data offered markets some relief, reinforcing confidence in the economy while giving the Fed greater flexibility to raise rates should inflationary pressures reaccelerate in next week’s July data. Stock futures are pointing to a mixed open to start the day, with the tech-heavy Nasdaq showing the most weakness. The VIX has fallen notably from yesterday’s spike above 18.4 as it starts the day hovering just below the 16-mark. The dollar is quietly higher as it trades just above 99.8, holding in the tight range seen thus far this week as traders continue to digest data to shape expectations for the Fed’s next move, which we’ll dive into in more depth below. Long-term treasury yields have relaxed slightly from their recent spike, with 30-year yields starting the day trading just above 5.19%, while 10-year yields trade above 4.64%, and 2-year yields sit below 4.22%. Crude oil is modestly higher to start the session after sharp declines earlier in the week, with nearby WTI up 1.8% to trade at $76.40 and nearby Brent up 2.4% to trade at $81.40. Meanwhile, the ags are quietly mixed to start the day.

Mike CastleThu, 06 Aug 2026, 13:24

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Perspective: Mid-Day Commentary for August 5

August 5 – The Dow Jones is ripping higher for yet another session, up safely over 500 points at the time of this writing to carve out another record high; the S&P and NASDAQ are a bit less enthusiastic but the former is still making its own record high, while the latter is less than 500 points off its own top thanks to a strong ongoing week of trade. The dollar is churning lower this morning in an effort to re-test Monday’s 1 ½-month low, while the ten-year note has flipped higher in the mid-morning hours. The CME FedWatch tool interesting has market odds of a quarter-point rate hike next month coming closer to a 50-50 proposition as crude oil prices decline.

Mike CastleWed, 05 Aug 2026, 15:19

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