Guest Commentary by Matt Zeller, Senior Market Intelligence Analyst
January 5 – The Dow Jones is trading decently higher (over +100 points as of the time of this writing) after a minor recovery yesterday, but the benchmark U.S. stocks index is still headed for its first losing week in the last ten – as are the S&P and NASDAQ. The equities market is holding in nicely – still only around 150 points off Monday’s all-time record high – despite taking a few blows from Fed minutes and economic data this week. The CME’s FedWatch tool still says the market thinks there’s more than a 50% chance of a 25-basis-point rate increase in each of the four Fed meetings from March through July, but that will take a notable swing in jobs data and a wild pivot from the Fed language from this point. The next Federal Reserve policy meeting is set for January 30-31, and will almost assuredly see another unchanged target rate from the board; the FedWatch is over 93% in agreement there.
The strong jobs report headlined economic releases earlier this morning but there was still plenty of data available to follow before the reporting week closed. New orders in November for United States manufacturers rose 2.6% from October, above the average trade estimate of +2.3%, and contrasting a 3.4% contraction in October. Factory orders have swung wildly back and forth since the summer months, but orders excluding both transportation and defense were stronger month-over-month as well. Durable goods orders also rose in November, meeting expectations and equaling the October increase at a +5.4%. Finally, the Institute for Supply Management reported its December gauge of overall services at 50.6; that was the largest MoM contraction in more than three years and the second-weakest absolute reading of 2023, but that 50+ figure still indicated economic expansion.
Commodity Weather Group charts below show their current South American outlook for the next three five-day periods (from left to right) and then their prediction for Monday’s maps for the latter two extended time frames; those outlooks do hold precipitation further south, and that would allow northern dryness to rebuild by the 11-15 day period, while southern Brazil and Argentina remain in good shape. We are starting to see an interesting gap building between government and private Brazilian crop estimates; StoneX Brazil slashed output to 152.8 MMT earlier this week and private firm Safras & Mercado cut their own number by almost 7 MMT today to 151.4 MMT. Conab and USDA estimates were still above the 160 MMT mark as of early December, and even a USDA attaché report this week only cut that figure to 158.5 MMT. A wide gap lingers in crop estimates and plenty of growing season remains, despite the trade’s insistence on taking out risk premium over the last month and a half.
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