Ending stocks for corn and Soybeans, as of march 1 are a record.Farmers knowing this fact are expected to plant less corn and Soybeans for upcoming season. This caught the market off guard as no one expected such drastic cuts in acreage. latest prices see Corn +3.6%,Soy +3% and soy meal +3.5%.A perfect storm now for meal as Argentine weather worries and Now possibility of smaller US crop. Everything coming up roses for Soy meal.Spring wheat numbers bearish But other types of Wheat leaned bullish,
The 2/10 yield spread broke below this year’s lows and trading at tightest or flattest levels since 2007.The 5/30 spread is mirroring the activity of 2.10 as well but the 1/10 not yet below 2017 lows. These spreads especially the 2/10 and 1/10 are the recession barometers the closer they go towards zero the higher chance of recession. Maybe this time is different as US long yields are very attractive when you compare them to European and Japanese rates so possibly the need for yield buyers are suppressing long end rates. Why this time may not be different is that market does not believe in the hawkish Fed outlook for rate hikes the market is pricing a lower terminus rate then fed is predicting and a slowdown to come sooner rather than later and Inflation will not take hold above 2%. All ideas one can infer from the US yield curve.
Back to market activity. Bunds in a very tight 21 tick range, Spot euro 25 pips but Stock markets active once again. The tech sell off over the last few days still affecting the trade either positively or negatively. Today positive as Nasdaq +.6% after being lower 4.5% over prior 2 days Spoos +.3% down ~2% last 2 days. Dax +.8%, Spain and France +.6% FTSE +.4%.german Inflation data was ignored, Holiday market cannot be bothered with economic releases. Gold working on a third consecutive lower close after rallying for four straight days. Crude oil sideways to lower working on a 4th consecutive lower close and more damage to the short-term uptrend. Month and quarter end, last day to trade April Rbob, HO and may bent may cause some volatility at the 1:30 Settle.11:00 A.M crop report is one of the biggest of the year and is expected to cause plenty of volatility.
• 7:30 PCE Core
• 8:42 Chicago PMI
• 9:00 Michigan revision
• 12:00 Feds Harker to speak On economy
Trump continues to bash Amazon stock down a few bucks pre market
Dollar +1.35%, AUD and CAD +1.25% vs Jpy as nobody wants anything to do with yen.Japan’s Fiscal year-end could have something to do with the flows as JPY needs to be sold(Reuters),North Korea said they want to sit down with Japan,This weighed on JPY over last 45 minutes.Plenty of Shorts in Dollar index need to be covered if the reflation trade starts to take a hit(BB),Today’s GDP release was old news but still it was revised higher and a week bereft of top-tier data Dollar grasping for anything.
Stronger dollar weighing on Gold as She has traded back below the old breakout level putting the up trend in Serious doubt.Crude oil -1.4% and heating Oil -.77%
lean hog calendar spread J/M has been a one way trade as too much supply now ,may lead to not enough later as farmers pull back on Supply.Summer cant get here soon enough .
The Chinese Yuan has strengthened to highest level in about 2 years vs. dollar. WSJ is reporting and I tend to agree that this strength could be a move by China to appease the White House cries of China devalues Currency to help trade.A few other notions were provided within story but I believe a move like this is a subtle attempt to shrink the balance of trade between 2 countries.
Moving past 10:30 European cash close DAX paying little interest to today’s movements in Nasdaq. Likely most Europeans gone on holiday and will be quite happy for DAX to move little. Dax closed -.3% and France’s CAC unchanged
The “rented Mule” in today’s trade is Amazon Not FB as the latter unchanged on day and former down 7%.reports that Trump is “obsessed with Amazon but not in a good way.from Business insider” The president is considering targeting Amazon’s tax status and believes company is getting free ride from US postal Service.” Below is grid of today’s performance of some big tech.DOW is Little remember that
All about the products s both gasoline and heating oil numbers leaned towards the bullish side.Distillate demand higher last week but gasoline demand little changed. the breakdown within the padd districts painted a picture of less supply in the Northeast for both products.Almost all the draw down in gasoline and Distillate stocks was located in PADD1 ,The Central Atlantic district.Drawdown in oil stocks not as large as the API lead in sl less bearish then expected.OIl bounced but now being pressured lower by the NDX sell off.
NDX -1.3% SPX -.2% markets trying to force a test of the 200 D in SPX and the 2586 Level in Spoos.DOW little changed alla bout the NDX
Bloomberg Headline “Tech Carnage takes breather as market hits support”
It isn’t Just Facebook that is causing pain in Big tech TSLA -8% yesterday down 8-10 days, nvidia down 7.7% yesterday and 5-7 days as the Self driving car accident last week darkens the future of driver-less Technology. Besides individual Stock, worries recall that Trump has said he wants to crackdown on Chinese investments in technologies that US considers Sensitive. Selling begets more selling so as Quarter end approaches maybe some weak hands are forced to sell some of their tech holdings. Bloomberg has a graph showing the spread between the IV of Nasdaq and Spx reaching a multi month high indicating NASDAQ is the Index leading the Volatility in Stock markets. One more comment on FB, 5-day average volume in stock was ~19 mln shares a day. 3 of last 7 day volume over 100 mln and all 7 have been over 50 mln, over this 7 day period from high to low stock down 19%.Watching 200D MA in SPX 2587(2586 in Futures) Currently Spoos and Nasdaq steady to higher, Europe trading lower Dax -.6% NKY closed lower by 1.34%. All eyes on NASDAQ today.
The probability for US rate hikes this year has changed little this week as the chaos in stock, market has little to do with macro-Economic worries. Bunds a bit higher as are bonds as the nervous stock market providing a bid in complex. Focusing on the 5 year shows prices breaking out of a Sideways 6 week range. Record amount or near record amount of net shorts in 5-year futures providing plenty of ammo if this short squeeze picks up momentum. Month end, Quarter end, holiday all in same week will dry up liquidity and possibly lead to outstretched moves.
Dollar has small bid this morning But JPY being sold vs all majors as the School scandal surrounding the PM and Fin Min back in the headlines today. Lower JPY is a good sign for Risk on Sentiment. Dollar choppy to lower on the short term and one reason for this is that nobody can say whether tariffs are good or bad for the dollar. Today’s GDP is the final look at Q1 it should not have much impact on trade. Instead, I will be looking at trade balance numbers also released at 7:30.
Other markets Oil down .6% as yesterday’s API numbers surprised with a bigger build to oil stocks than expected. Gold -.7%, copper little changed and Cocoa -1.7%
All eyes on big tech to drive sentiment and action today
Nasdaq being pummeled again Individual stock worries,China retaliation ,End of Month, End of Quarter adjustments and long liquidation continues.Watching yesterdays and Fridays lows(6520 ) as an area where things really could get ugly. Right now Nasdaq hasn’t violated any significant tech levels to downside as long as that holds true just noise . NDX -2.6%,SPX -1.2% . Bond yields – 5.5 Bps 5 years – 6.3 Bps,7 years -7 Bps.Interest rate hike probabilities are little changed from Friday as the stock Sell off has yet to impact the macro view of Economy as it should.Watching 200 d MA in SPX 2585 as the go no go zone
Consumer confidence little changed vs last month,Inflation metric ticked down by .1 and jobs plentiful stayed strong.Below is the graph of the ratio of Jobs plentiful/Jobs hard to get. This spread continue to strengthen and widen out which is a positive for the Economy.I am in the process of determining whether the higher spread indicates a cap on wages or it actually is a precursor to higher wages I have to compare a few other metrics before any answer can be reached.Monthly chart with red horz lines =recession
Brent well bid this morning taking direction from strong Gasoil/Distillate markets.India whose fiscal year starts April 1 Said they are expecting to almost double the Amount of Diesel use compared to last year. This isn’t only excuse for Move higher but someone in market nervous about Diesel supply. The gasoil “Supply spread” 2nd-3rd month calendar spread is moving higher and thus tighter supply.A daily chart below
using the same thinking as above The 2nd and 3rd month Brent spread,Supply spread also moving higher pricing in less supply or more demand.The spreads are telling us what is happening it is just a matter of why it is happening.
Risk on! Spoos Continue to bounce for a second day but unlike yesterday Europe has decided to join the party. Dax +1.6%, CAC and Mib +1.33%.Spoos +.5% after closing 2.38% higher yesterday. Nasdaq +.8%,Closed higher yesterday 3.3%.I don’t fully believe trade war worries have subsided but market know all .Dollar has identical range to yesterday she is trading higher by .6%,Euro -.5%,JPY -.4%.Gold -1%,Silver -.8% copper +.8%. Yesterday everyone hated the dollar and loved euro today exact opposite. Oil ignoring Dollar strength for now but doubtful it can stay this way if dollar continues to push higher. GBP being hit hard as she trades lower by over 1% vs dollar as negative Brexit comments hit sentiment.
Treasuries higher in short end down a touch in the long end. Curve a bit steeper as only $124 b of Gov. Paper to be auctioned off today. Bunds and gilts little changed to higher. Import price data from Germany lower then consensus Economic confidence of Eurozone lower than expected providing a reason to sell Euro. Month end, quarter end, Low Liquidity, Holiday themed markets all playing a role in the choppy inexplicable moves.
10:00 Consumer confidence
10:00 feds Bostic