Oil up again, Indices flat on rate uncertainty

Stocks were generally higher at midday but lack any strong impetus to move higher. Consumer spending grew less than expected in the fourth quarter, reflecting apprehension over the direction of the economy. That, combined with slower GDP growth, continues to fuel Wall Street’s argument that the Fed “must” pivot its policy in the months ahead to end rate rises, and start rate cuts. However, Labor market data out today illustrate that we still have a very tight jobs market, which continues to feed wage inflation. No easy answers …

For more detailed market commentary go to StoneX Market Intelligence, https://my.stonex.com/. 

Indices up, Dollar and Bonds weaker

• The broad S&P 500 index was up 0.5% at 4,049, while the tech heavy NASDAQ was up 0.7% at 12,004
• The VIX, Wall Street’s fear index, edged up 19.5
• The dollar index was 0.4% lower 102.4, with £/$ 1.24 and €‎/S 1.09
• Yields on 2- and 10-year Treasuries were higher at 4.14% and 3.57%, respectively

Oil stronger, US planting intentions anticipated

• Crude oil prices were up 1.6% by midday to $74.17 per barrel
• Grain and oilseed traders focused on positioning ahead of tomorrow's highly-anticipated quarterly grain stocks and planting intentions reports, known for surprises
• These reports tend to set the tone for the rest of the spring as they focus the trade on domestic supply and demand fundamentals
• Much of the focus of the market tomorrow will be on USDA's planting intentions. The trade expects it to show that farmers "intend" to plant 90.9 million acres of corn and 88.2 million acres of soybeans in the upcoming growing season; Arlan Suderman estimatesthat farmers intend to plant 92.0 million acres of corn and 88.5 million acres of soybeans
• A fiery train derailment this morning near Raymond, Minnesota involved rail cars containing ethanol and corn syrup, but with was little market impact

Real economy growth moderates, labor market tight

• Gross domestic product grew at an annualized rate of 2.6% in the fourth quarter of last year, a shade below the 2.7% forecast
• Personal consumption expenditures grew slower than expected, at just 1.0% in the fourth quarter on an annualized basis, revised down from previously stated 1.4%
• First-time claims for unemployment benefits totaled 198,00 in the week ending March 25, up from 191,000 the previous week and ahead of analyst expectations of 195,00
• The four-week moving average rose to 198,250 claims, up from 196,250 the previous week

China challenges US support for Taiwan, expect fireworks

• China has demanded there be no diplomatic contact between US and Taiwanese leaders in the United States
• When contacts happen, and they inevitably do, China punishes the US, Taiwan or both
• If Taiwan President Tsai Ing-wen meets US leaders, as planned, expect fireworks
• China warns of a “serious confrontation” if her meeting with Congressional speaker Kevin McCarthy takes place
• Like the August Pelosi visit to Taiwan speaker Nancy Pelosi, McCarthy cannot now be seen as backing down to the Chinese government; China has also put itself in a position of being unable to back down from its threats

Russian grain trading loses more foreign partners, grain prices could benefit

• More foreign companies pull out of the Russian grain trading business under pressure from President Putin’s regime – Russian farmers will ultimately the losers, and could limit production going forwards
• The near-term market impact is to create uncertainty, leading speculative fund managers to exit large short positions, and putting upward pressure on grain prices
• Louis Dreyfus will be the next foreign grain company to pull out of Russia, Bloomberg reports, following Viterra and Cargill
• Grain is still expected to continue to flow out of Russia, but on Russia’s terms and with less transparency over what’s happening inside the country

Analysis by Arlan Suderman, Chief Commodities Economist.

Read more of Arlan’s thoughts at StoneX Market Intelligence at https://my.stonex.com/