What are Markets Waiting on Thursday Morning? n
Financial markets are supposedly waiting on the release of August's inflation numbers from the US government before knowing what move to make next.
Similarly, Watson is at a standstill in Grains until USDA's WASDE numbers are released at high noon (ET) Friday.
Anyone who has visited Las Vegas has seen this type of Keno game before.
Morning Summary: I suppose all we can do now is wait for US mid-term elections this coming November. After all, the US president has said fuel prices won’t come down until then, and if US voters keep his regime in power he will pay each and every one of them a $5,000 “dividend”. Is that legal? Does it matter anymore? In other news, supposedly financial markets are waiting on “key wholesale inflation data” in the form of August’s Producer Price Index set for release Thursday and Consumer Price Index on the docket for Friday. As I’ll talk about with the Grains sector, reality doesn’t matter. We can see inflation everywhere we look, but if government generated numbers say differently, algorithms will react. That’s how it is. For the record, the PPI average pre-repot guess is 0.4% as compared to last month’s 0%. The average guess for the CPI is also 0.4%. At least we have easy to remember parameters. Once we get past this week’s Keno game, next week brings the latest meeting of the Federal Open Market Committee. Thursday morning’s Fed fund futures forward curve continues to show the next 25-basis point rate hike should be seen in October, ahead of US mid-term elections.
Corn: The corn market was quietly higher overnight through early Thursday morning. Why? Well, let me put it this way: Algorithms are waiting for USDA’s September WASDE report set for release Friday. That’s all that matters these days, as we saw following the release of the suspicious August numbers. Early harvest rebuilding supplies? So what. Demand still a question mark? Doesn’t matter. The only thing that counts is how USDA’s manufactured numbers relate to pre-report estimates. That’s it. In other words, it’s nothing more than a game of Keno worth billions of dollars[i]. But fundamentals win in the end, right? Just as Rule #6 tells us? Not necessarily these days. Why? Because algorithms aren’t the pit traders of old who understood things like supply and demand. Markets are nothing more than statistics: Volatility, momentum, moving averages, etc.; and easily triggered by headlines and social media posts. For the record, pre-report estimates for Friday morning show expected further reductions in corn yield and US ending stocks. This sets the stage for a potential bearish “surprise” if USDA comes in above these numbers. As for the December issue (ZCZ26), it was sitting 3.0 cents higher on trade volume of about 20,000 contracts pre-dawn Thursday.
Soybeans: The oilseed sub-sector was cleaved in twain overnight with canola and soybean oil lower while soybean meal and soybeans sitting higher to start the day. A look at the Energies sector and we see diesel fuel is down about 5.5 cents pre-dawn after falling almost 10.0 cents. Recall diesel rumbled as much as 25.0 cents higher Wednesday before closing with a gain of 23.3 cents. The spot-month contract hit a high of $4.82 overnight, just hy of its March 2026 peak at $4.8360. As mentioned in the opening Summary, the US president is now saying fuel prices won’t come down until after US mid-term elections in November. So we have that to look forward to. As for soybeans, it’s the same story as corn. Watson is waiting for WASDE. (That’s fun to say. I’ll have to remember it the next time USDA’s monthly Keno game is scheduled for a Wednesday.) As with corn, pre-report guesses show another decrease from August, the opposite of what the Nov-January futures spread has been showing us. But again, algorithms don’t care about “real” supply and demand. Speaking of the November issue (ZSX26), it was sitting 7.0 cents higher at this writing on trade volume of 15,000 contracts after closing 6.75 cents lower yesterday.
Wheat: The wheat sub-sector was in the red early Thursday morning. My Blink reaction is the three markets saw follow-through selling from Wednesday’s double-digit lower close. The December SRW issue (ZWZ26) extended its selloff as much as 5.5 cents overnight on trade volume of about 10,000 contracts but was sitting only 1.5 cents lower at this writing. It was a similar story in HRW where the December issue dropped as much as 7.5 cents on fewer than 3,000 contracts changing hands and was still 4.0 cents in the red. Watson won’t be paying much attention to wheat WASDE numbers Friday, with most of the chips being placed on corn and soybeans. This leaves Vlad the Invader and his nuclear threats as the wildcard. (Fitting for someone also known as the Madman Across the Water.) As we get deeper into September, the first month of meteorological fall despite temperatures that remain summer-like, the spotlight should grow brighter on new-crop July winter wheat contracts. I stopped for a moment after writing that last sentence, because it shows my age. I again jumped to the erroneous conclusion that fundamentals still matter, that Rule #6 is still a thing. Anway. December HRS was sitting unchanged to start the day.
[i] For those wondering: Keno is the game of choice for the desperate gambler who has lost everything at the casino. Players buy a ticket with a series of numbers, generated by the house, and sit nursing their last free cocktail or cup of coffee and wait for the house to tell them if they won or not. Think about that for a moment. The last time I was in Las Vegas, I was with my friend Mike Pearson as we gave a market discussion at a heavy equipment industry convention. During one down time, I sat in the casino’s café watching the wretched wrecks play Keno. Oddly enough, not one winner the entire time. Go figure.
On the date of publication, Darin Newsom did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.