Perspective: Morning Commentary for May 26

By: Arlan Suderman, Chief Commodities Economist

Thu, 26 May 2022, 13:27

Perspective: Morning Commentary

Arlan Suderman

Chief Commodities Economist

May 26 – Follow-through buying supported stock futures overnight, ahead of this morning’s updated data on our economy’s growth, or lack thereof, in the first quarter of this year. Traders are also talking about the content of the minutes of the early May Federal Reserve policy meeting that were released Wednesday afternoon. The VIX slipped lower to trade near 28 this morning, while the dollar index is trading near 102.0. Yields on 10-year Treasuries are trading near 2.74% this morning. Crude oil prices are 1% higher, while the Ags were again under pressure as traders contemplate the possibility of Ukrainian exports.

Gross domestic product, which is our way of measuring the output of our economy, fell 1.5% year-on-year in the first quarter of this year in the second reading of GDP for the quarter. That’s down from the initial reading of 1.3% contraction released last month, and even worse than the 1.4% contraction anticipated by analysts. Personal consumption expenditures grew 3.1% year-on-year in the first quarter, up from the initial reading of 2.7%, and up from analyst expectations of 3.0%. So, the consumer was spending at a faster pace, largely due to inflation pushing prices upward, while the economy contracted.

First-time claims for unemployment benefits fell to 210K in the week ending May 21, down from 218K the previous week, although still above the 208K anticipated by analysts. This put the four-week moving average at 206.75K claims, up from 199.5K the previous week. Continuing claims rose 31K to 1.346 million in the week ending May 14, while the four-week average for continuing claims fell 14,250 to 1.3475 million, which is its lowest level since January 17, 1970. Some analysts are starting to say that we’re seeing the early stages in a rise in unemployment. Ironically, that is something that needs to happen to tame wage inflation. We may indeed be seeing the early signs of a turn in the jobs market, but far more data is needed to confirm that. This may simply be the ebb and flow of data. Nonetheless, it puts a bit more focus on next week’s monthly jobs report.

There were few surprises in the minutes of the Fed’s May policy meeting that were released yesterday, but there was one point of debate for Wall Street traders and economists. The minutes indicate that the Fed intends to continue its 50-basis point rate hikes through the next two meetings, taking the benchmark rate to 175-200 by the July meeting. It is then considering taking a break in the pace of rate hikes ahead of the mid-term elections. That would be yet another step in delaying pushing interest rates to neutral, and delay getting interest rates above the rate of inflation, which could further intensify the inflation problem at hand. The Fed doesn’t want to appear political, so once again it’s going to make itself political by trying to stay apolitical. This puts even more focus on tomorrow’s PCE inflation data, which the Fed puts its highest trust in for policy making. Frankly, the Fed painted itself in a corner by waiting so long to act, convinced that the inflation was transitory when it was not. It now has few good options, and that is what worries Wall Street. It’s interesting to note that the markets are still pricing in expectations that the Fed’s benchmark rate will be 250-275 basis points by the December meeting, as the Fed becomes forced by the data to raise rates more than it would prefer. Of course, another piece of this puzzle is the indirect impact on interest rates that is accomplished by shrinking the balance sheet, as I outlined previously this week.

Grain and oilseed prices were again under pressure overnight as fund managers fretted over reports that Russia was willing to open up a couple of safe-passage corridors for seven Ukraine ports to export food-based commodities in return for a partial lifting of sanctions against Russia. U.S. State Department spokesperson Ned Price stated in a press briefing yesterday that “we certainly won’t lift our sanctions in response to empty promises, and we’ve heard empty promises before from the Russian Federation. I think we have – all have good reason to be skeptical when we hear various pledges and offers from Russia.” Nonetheless, Turkey continues to negotiate with Russia and Ukraine to see if a corridor for the movement of food can be opened. Ukraine is estimated to have 20 million metric tons of grains trapped in its ports by the Russian blockade. Fund managers are hedging their risk, with prices just below record levels in many cases, taking profits just in case Ukrainian grain does start to move. I think a healthy dose of skepticism is appropriate here though. Some say that Russia is giving in to domestic and international pressure for causing a global humanitarian crisis, but that doesn’t fit President Putin’s mode of operation. Putin would be reversing one of his primary stated objectives for shutting off Ukraine’s ability to engage in commerce via the ports – essentially admitting failure.

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Perspective: Morning Commentary for August 12

August 12 – Today’s focus is on inflation, with the July consumer price index data out this morning. We have this, and one more month of data, ahead of the next Federal Reserve meeting. Of course, headlines from the Middle East and the Black Sea wars also have an ongoing influence on the markets. Stock futures posted gains this morning, while the VIX traded just below 15. The dollar index traded near 99.7. Yields on 10-year Treasuries are trading near 4.66%, while yields on 2-year Treasuries are trading near 4.18%. WTI crude oil is trading near $83, while Brent trades near $88 per barrel. The grain and oilseed markets rebounded from yesterday’s losses ahead of today’s highly anticipated WASDE crop report that is due out at Noon Eastern Time.

Arlan SudermanWed, 12 Aug 2026, 13:33

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Perspective: Morning Commentary for August 11

August 11 – It was generally a quiet night for the markets until early this morning when a headline hit that Iran and Oman were close to reaching a deal. Stock futures rallied, while the dollar index followed Treasury yields lower, along with active selling in the energy- and food-based commodities. The headline had limited impact though in a world that has become skeptical of promises of peace. Stock futures remain steady to firmer at this hour, while the VIX trades near 16 – just above 2026 lows. The dollar index is trading near 99.8 this morning, after recovering from its early morning selloff over the following hour of trade. Yields on 10-year Treasuries are trading near 4.69%, while yields on 2-year Treasuries trade near 4.22%. WTI crude oil is trading near $82 per barrel at this hour, while Brent trades near $88. The grain and oilseed markets are mostly weaker, after failing to recover from this morning’s early selloff that started in the crude oil market.

Arlan SudermanTue, 11 Aug 2026, 13:21

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Perspective: Morning Commentary for August 10

August 10 – The world commodity markets and economy remains at risk amid two wars this morning. Tensions continue to escalate in both the Middle East and the Black Sea – risking pulling other countries into the conflicts. Stocks are down modestly this morning as we start a week of trade in which we’ll see key inflation and retail sales data following a weak jobs report this past Friday. Yet, stocks continue to trade just below record high levels, with the VIX trading near 2026 lows just above 15. The dollar index is trading near 99.7. Yields on 10-year Treasuries are trading near 4.68%, while yields on 2-year Treasuries are trading near 4.23%. The energy and food-based markets are firmer today amid the escalated risks. WTI crude oil is trading near $80, while Brent trades near $85 per barrel. Double-digit gains in the winter wheat markets lead the way for higher grain and oilseed prices.

Arlan SudermanMon, 10 Aug 2026, 13:51

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