U.S. Stocks Hit 12-Week High
After opening near overnight highs, U.S. stocks reached their highest levels since March, following European & Asian indices as it appears that optimism over the economy may have given investors a confidence boost. Front-month ES futures rose for a second day in a row, as Microsoft agreed to buy coding site GitHub for $7.5 billion.
It’s possible that traders may be starting to ignore every tweet or announcement made on the trade front. Last week seemed like a seesaw to some, as tweets & speeches flew out of China, Canada, Mexico, Europe, and the U.S. at a dizzying pace, which each country making its own opinions & threats heard about the various trade agreements between all parties involved. Investors may be instead turning to the impressive U.S. jobs data on Friday, providing the market with some needed confidence after such a rocky week. However, the risk for more rockiness in U.S. stocks is not over. G-7 leaders will meet in Quebec later this week, as the EU & Canada threatens retaliatory measures for Trump suggesting that the U.S. imposes new aluminum & steel levies.
Memorial Day weekend was likely a stressful one for many farmers around the country, as some rushed to finish planting after being in areas that received far above-average levels of rain in the last couple weeks. Some speculators believe that this year’s spotty planting season has been a major factor in seeing contract highs in corn, soybeans, and wheat.
December Wheat futures hit contract highs in early Tuesday trading, as worries about adverse weather across key growing regions threaten to reduce crops.
Soybeans rose as hopes spurred that China will resume buying U.S. beans again, after the recent trade dispute disrupted purchases.
Corn is up too, possibly drawing some support from wheat on similar weather concerns.
U.S. Stocks Update
U.S. stock futures have been heading mostly lower in early Thursday trading. Selling action by some speculators may have been triggered by renewed fears of a conflict with North Korea. Choe Son Hui, the nation’s vice minister of foreign affairs threatened a “nuclear-to-nuclear showdown”. President Trump responded this morning with an open letter, stating that the US will be pulling out of a long-planned summit with the nation.
Futures were trading higher yesterday, after the FOMC meeting minutes indicated that they will not be too aggressive in raising rates. Fed Fund futures indicated an increased likelihood that we will see only two more interest rate hikes this year, versus the three that was expected before the minutes were released.
US Dollar Rises, Gold Falls
Gold futures prices have fallen so far during Monday trading, contributing to a 1%+ decline for the month, as the Dollar Index appears close to closing out its best month in over a year. The index may have finally been pushed higher due to the Fed’s continuation of raising interest rates. Traders have pegged the probability of another rate hike during the June FOMC meeting at 92%. Additionally, the personal consumption expenditure inflation gauge reached the Fed’s target for the first time in over 12 months; something that may signal a faster-than-expected increase in U.S. interest rates. Generally, raising interest rates is seen as being supportive for the dollar, which conversely tends to put downward pressure on the ‘safe haven’ assets such as gold.
This week’s FOMC statement may give traders clues as to the direction & frequency of additional rate hikes to come in 2018.
Oil Continues Higher
Crude oil futures continued to rally during early Thursday trading to 3 ½ year highs, following a drop in U.S. inventories. Front month Crude is up 2% in the last 5 trading sessions, and 7% in the last 20. There appears to be a solid foundation of supportive forces is this market as of late. Refinery runs have remained strong, and U.S. oil inventories have only climbed by a total of three million barrels so far, compared to over 50 million barrels a year ago. Weekly U.S. gasoline demand hit the highest levels ever seen in April, beating the typical demand levels we usually see in the summer months of June, July, and August according to the Oil Price Information Service. The EIA also reported that gasoline demand hit a record of 9.857 million barrels a day last week.
Meanwhile, OPEC has remained strongly committed to shoring up production for higher prices. In recent briefings, Saudi officials have expressed their intent to see crude prices at $80-$100 a barrel.