Perspective: Morning Commentary for May 2

By: Arlan Suderman, Chief Commodities Economist

Tue, 02 May 2023, 13:56

Perspective: Morning Commentary

Arlan Suderman

Chief Commodities Economist

May 2 – Stock futures had a softer tone to them overnight, as traders note the beginning of two days of policy meetings by the Federal Open Market Committee. Yet, the VIX continues to trade below 17 this morning, or just above yesterday’s 18-month low. The dollar index is trading near 102.3, or near this morning’s three-week highs. Yields on 10-year Treasuries are trading near 3.53%, while yields on 2-year Treasuries are trading near 4.12%. Crude oil prices are modestly weaker this morning as traders mark time ahead of tomorrow’s Fed statement, while the grain and oilseed markets are mixed, continuing with Monday’s trends of higher soybean and weaker corn and wheat prices.

First Republic Bank fell into the hands of the Federal Deposit Insurance Corporation over the weekend, before it was quickly purchased in an auction by JPMorgan. I didn’t devote space to it yesterday because it wasn’t a story – it didn’t have much of an impact on the markets. But that really was the story. The third regional bank of about 30 of similar size failed over the weekend, and no panic ensued on Wall Street. JPMorgan CEO Jamie Dimon said all the right things – how this now puts the bulk of this banking crisis behind us – but you wouldn’t expect him to say anything else. There very well may be more failures, and many depositors remain nervous. Yet, Wall Street’s reaction suggests that we’ve moved away from the “fearing the worst” mentality to currently anticipating the best, or at least something close to that. The VIX – Wall Street’s fear index – is trading near 18-month lows, and a major bank failure does little to change that. Emotions can pivot quickly on Wall Street, but for now we must take note that the VIX set those 18-month lows on the first trading day after First Republic’s failure, and just ahead of what is expected to be another rate hike from the Federal Reserve.

The markets are future oriented. They trade future expectations. Both the Nasdaq and the S&P 500 stock indices are trading just below their February highs, and you must go all the way back to August to find higher values. They’re doing so despite 95% odds this morning that the Fed will hike its benchmark interest rate another 25 basis points tomorrow because traders are already looking ahead to the anticipated pause to follow the rate hike, and the anticipated rate cuts to come after that by the end of the year. These dynamics could change if the Fed comes out with more hawkish language than traders anticipate tomorrow, while they could also change if the language was more dovish than expected. The risk though is on the side of the Fed being more hawkish, as Fed members continue to emphasize that they do not want to repeat the mistake it made in 1980 when it pivoted too soon.

Geopolitical risks continue to increase, with the weekend seizure of a U.S. bound oil tanker by Iranian forces. This occurred after the United States seized a tanker of Iranian oil destined for China. This comes as “experts” warn that the risk of an unintended war with China continue to rise. Encounters between U.S. and Chinese aircraft and warships continue to rise in the Taiwan Strait and across portions of the disputed South China Sea. These are largely seen as international waters that the United States is trying to keep as such by regularly passing through them. Meanwhile, China is claiming these territories, while taking steps to intimidate Taiwan and other surrounding nations. The rising tensions are so great that Japan is doubling its military defense budget, while South Korea is strengthening its defense forces as well due to the growing threat they see from China. Increased presence of conflicting forces increases the risk of accidental conflict that turns into war.

Ukraine reports that negotiations over the “Grain Deal” will happen tomorrow, with all parties involved, including Russia, the United Nations, Turkey, and Ukraine. Under the framework of the current agreement, no direct talks occur between Russia and Ukraine, but rather they speak through Turkey and the United Nations. Ukraine expects its grain exports in the 2023-24 marketing year to be half of this current year’s shipments due to ongoing problems of shipping through the “safe corridor” and due to rising restrictions for moving grain west through Eastern Europe.

The good and the bad offset one another in the wheat crop over the past week, with a net no-change to the crop’s condition index score, as it remains at 270. Oklahoma and Texas saw some improvement due to rainfall over the past week, while Kansas, and Nebraska saw more notable declines, while Illinois also saw a significant decline due to dry conditions. Further north, we’re already starting to see some South Dakota producers make the switch from oats and spring wheat to corn and soybeans. The big surprise in next week’s May USDA WASDE crop report may be how small the winter wheat crop is, although that will likely be offset by seeing how big the corn and soybean crops may be if the crops continue to see active planting progress. No significant planting delays are seen to this point, and the next couple of weeks look to see significant progress in getting the crops in the ground. Soybeans continue to see strength from solid crush demand amid tight old-crop supplies, but there’s still a lot of Brazilian soybeans yet to hit the cash market, and USDA will likely show notable expansion of stocks for the coming year.

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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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Matt ZellerWed, 05 Aug 2026, 12:39

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Perspective: Mid-Day Commentary for August 4

August 4 – The Dow Jones is absolutely piling on gains today, adding a similar number that led to yesterday’s record, with the benchmark index now nearing the 54k-point mark through mid-morning. The S&P also hit a new record, while the NASDAQ is exceeding both those gains on a percentage basis. The marketplace is optimistic on a U.S.-Iran trade deal, though the proposed resolution is still being “circulated between the parties”.

Mike CastleTue, 04 Aug 2026, 14:58

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