S&P 500, Oil lead markets

By :  ,  Financial Writer

Big tech earnings and expectations of a Fed pivot supported a modest "risk-on" sentiment on Wall Street today, with commodities finding tailwinds from an escalating Ukraine conflict. Fed fund futures are pricing in 100% certainty of a 25-basis point rate hike on Wednesday, with rates then expected to decline by 100 to 125 basis points during 2024. The first reading for second quarter gross domestic product is expected to be released on Thursday, with analysts expecting it to show 1.5% growth during the quarter.

Bottom-line: Risk-hold.


Delivery strike threatens US economy

UPS and the Teamsters union are negotiating to avoid a mega strike which would halt daily deliveries which account for roughly 5-6% of US gross domestic product, with the potential to cause higher inflation as suppliers use alternative delivery methods. The International Brotherhood of Teamsters represents its 340,000 delivery and warehouse workers, handling handles 22 million domestic packages a day, or a quarter of all deliveries. If agreement isn’t reached by August 1, the strike would be the single largest against a US business in history.

Big Tech features in earnings reports

Earnings season ramps up this week, with over 150 of the S&P 500 companies reporting. Big Tech results from Microsoft, Alphabet, and Meta, are key, given that second quarter reports from Tesla and Netflix last week dragged Nasdaq last week.

Commodity inflation is an investible theme

Commodity inflation is a theme that plays on risks in the Black Sea Region, with investors buying soft commodities and oil as hedges. Russia’s formal withdrawal from the Black Sea Grain Initiative a week ago, but it goes well beyond that. That was followed up by strategic strikes against Ukraine's export infrastructure, including today's strike on its ports on the Danube River at the Reni Seaport. That led to nearly 30 ships dropping anchor at the Izmail port, but will it be the next target?

Part of the stated reason for withdrawing from the Black Sea Grain Initiative was Russia’s complaint that not enough Ukrainian grain was going to the poorer countries of the world. Ukraine publicly stated that it would find other ways to ship grain, and Russia promptly started bombing Ukraine’s ports that would make such shipments possible. That included last night’s bombing of the Reni Seaport on the Danube River that provides a border between Ukraine and Romania. This is probably the most important attack on Ukraine’s export capabilities seen to date since the war started in February 2022. Air strikes on port facilities at Odessa can be explained away as a consequence of doing business in a war zone, but the strike on the Reni Seaport clearly had one objective – to stope Ukraine food grain shipments to the world.

Chicago Fed data points to slowing economy

  • The Chicago Fed National Activity Index for June came in at -0.32 this morning, well below analyst expectations of +0.03
  • The index is built on other pre-existing economic data points to equal zero during times of trend economic growth, with negative readings indicating an economic slowdown
  • The May index reading was revised to -0.28, down from the -0.15 originally reported
  • The index three-month moving average was also negative at -0.16


Equity markets

  • Markets rallied in morning trade but then somewhat petered out, with the S&P 500 up 0.4%, while the Nasdaq and Russell 2000 were up 0.1% and 0.2% respectively
  • Global markets were mixed, with the Nikkei 225 up 1.2%, while the DAX was unchanged and the FTSE was up 0.2%
  • The VIX, Wall Street’s fear index, rose modestly to 13.9

Currencies and Bonds

  • The dollar rose 0.2% against a basket of currencies, at 101.3
  • Sterling cross rates were unchanged, while the Euro and Yen fell 0.4%
  • Bonds edged higher, with yields on 2- and 10-year Treasuries at 4.89% and 3.85% respectively


  • Crude oil prices were again the stand-out asset, rising 2.7% to $79.2 per barrel
  • Silver fell 1.0% to $24.6 per ounce, while gold fell 0.2% at $1,962 per ounce
  • The grain and oilseed sector found strength in escalating tensions in the Black Sea region. Grain and oilseed prices pushed sharply higher, with Chicago wheat locking the 60-cent daily trading limit high for a period

Analysis by Arlan Suderman, Chief Commodities Economist: Arlan.Suderman@StoneX.com

Market outlook by Paul Walton, Financial Writer: Paul.Walton@StoneX.com



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