Perspective: Morning Commentary for November 27

Perspective: Morning Commentary

Arlan Suderman

Chief Commodities Economist

November 27 – Today’s trading session will be a bit different, with the Thanksgiving holiday tomorrow. We saw a plethora of economic data released this morning, pulled forward due to the holiday period. The markets will be closed tomorrow for Thanksgiving, and they’ll only be open for a short day on Friday. As such, many traders are already preparing to hit the road to take the kids to grandma’s house for the holiday. Look for trade volume to drop off today, which can lead to some erratic movement in the markets in the days ahead. Even so, today’s data matters as we move forward, inching closer to the Federal Reserve’s December 18 monetary policy decision. Stock futures were generally firm overnight ahead of today’s data dump and trading session, with the VIX trading near 14. The dollar index was weaker overnight, but then it broke even lower, following Treasury yields lower following the data release to trade near 106.1. Yields on 10-year Treasuries are trading near 4.25%, while yields on 2-year Treasuries are trading near 4.21%. Crude oil prices are modestly lower in quiet trade, while the grain and oilseed complex was mixed to firmer overnight.

Durable goods orders rose by 0.2% month-on-month in October, falling short of analyst expectations of 0.5% growth. However, the previous month’s orders were revised to -0.4%, which is an improvement from the -0.8% contraction originally reported. Durable goods orders minus transportation grew at a 0.1% pace, which is slower than the 0.2% expected by analysts, and down from the 0.4% growth seen in September. Core capital goods orders, which tend to be a barometer of business sentiment, fell by 0.2% in October, whereas the previous month was also revised down to 0.3% growth, down from the 0.5% growth originally reported. Other data released this morning showed that the second reading of gross domestic product remained unchanged at 2.8% growth in the third quarter. Personal consumption expenditures rose by 3.5% on an annual basis in the third quarter, down from last month’s estimate of 3.7% growth. We’ll get updated PCE data on income, expenditures and inflation for October later this morning that could impact the Fed’s take on monetary policy.

First time claims for unemployment benefits fell to a low 213K in the week ending November 23, down from 215K the previous week, and below analyst expectations of 217K claims. The four-week moving average slipped lower to 217K claims, down from 218.25K the previous week. Continuing claims rose by another 9K to 1.907 million in the week ending November 16, which is its highest level since November 13, 2021, when it was 1.974 million. The four-week moving average rose by 13.5K to 1.890 million. So, why would continuing claims be rising while first-time weekly claims remain low? Likely due to ongoing problems of finding jobs in the hurricane-stricken areas of the Southeastern United States. We saw the initial surge in claims from that area when the hurricanes passed, but now we’re seeing the lingering continuing claims while businesses are being rebuilt.

Industrial profits fell 10% year-on-year in China in October, marking the third consecutive month of declines, despite stimulus efforts that ramped up in late September. That 10% decline was an improvement from the 27.1% year-on-year decline posted in September, but profits continue to slide, nonetheless. Industrial profits through the first 10 months of the year fell by 4.3% year-on-year, so the data suggests that overall losses are accelerating. State-owned companies, which are the foundation of China’s economy, saw 0.9% year-on-year revenue growth in the first 10 months of the year, with their debt ratio rising by 0.1 point to 64.9%, while profits declined by 1.1% year-on-year. These numbers suggest that we could continue to see negative ramifications for employment and household disposable income, and ultimately on consumer sentiment going forward. S&P Global downgraded its projection of China’s gross domestic product for 2025 by 0.2 points to 4.1%, with its projection for 2026 dropping by 0.7 points to 3.8% - both of which fall well short of China’s 5% goal needed to sustain its economic stability.

The grain and oilseed sector heads into the Thanksgiving break with a bit of a malaise. We’ve seen some solid corn and soybean export sales announced in recent days, but that’s also essential considering the large supply. We have not yet seen enough demand to suggest that demand needs to be rationed with higher prices. Brazil’s soybean crop continues to move toward maturity with high yield expectations, and we’re not yet seeing notable yield threats for Argentina either, although it is still quite early in its growing season. We anticipate that we’ll see much smaller export quotas announced for Russian wheat at some point in January, but shipments currently remain large, and at cheap cash price levels. Russia’s 2025 crop received good late showers, but still went into dormancy in less than desirable condition, and on fewer acres planted. Yet, this too won’t be a story before late winter or early spring. In the meantime, bigger than expected crops from Australia and Argentina are beginning to hit the world market. The bottom line is that the grain and oilseed markets simply don’t have a fundamental story in the near-term.

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Perspective: Morning Commentary for November 27

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