“Well 50 it is!”

Hi There! This past weekend was an absolute blast as I got to kick back at Music at the Intersection in midtown St. Louis, soaking in all the fun with comedienne B-Phlat, the BCassos, and other celebrities. We enjoyed delicious food from celebrity chefs, all while raising funds for Epworth Children and Family Services under the theme "Art Heals."

It was also a heartwarming time reconnecting with friends I hadn't seen in over a year, which made the weekend even more special. The musical lineup was incredible, from the legendary Chaka Khan to Trombone Shorty and Esperanza Spalding. But my true "close-my-eyes-with-no-care-in-the-world" moment came during Samara Joy’s set. Her velvety voice, refined yet rich, transported me, and at only 24, with three GRAMMYs and a chart-topping debut album, she’s poised to join the ranks of jazz legends like Sarah Vaughan, Ella Fitzgerald, and Billie Holiday.

It was a weekend filled with music, fun, lots of laughter, and memories I’ll treasure.

Alright, let’s dig in!

Last Week (September 8 - 14, 2024) Recap

U.S. stocks rebounded strongly last week, with tech stocks leading the charge. Positive comments from NVIDIA (NVDA) midweek pushed the Nasdaq 100 and S&P 500 higher, gaining over 4% and 5%, respectively. The S&P 500 is now close to new all-time highs. Treasury yields declined as markets anticipate the Federal Reserve’s upcoming rate decision. Investors showed strong demand for shorter-term Treasury auctions, locking in yields ahead of possible rate cuts.

U.S. Markets

U.S. stocks bounced back from the previous week’s losses, with tech stocks, especially semiconductors, taking the lead. The Nasdaq rallied over 5%, and the S&P 500 gained 3.9%, marking the best week for these indexes since November 2023. Small-cap stocks also surged, with the Russell 2000 rising about 4%. The Dow lagged behind with a 2% gain.

The market’s turnaround was sparked by NVIDIA’s positive outlook at an industry conference. Optimism around the Federal Reserve’s expected rate cut next week and strong earnings from Oracle (ORCL) helped lift sentiment. Despite higher-than-expected consumer and wholesale inflation reports, only the energy sector finished in the red, dragged down by JPMorgan Chase’s (JPM) cautious commentary on net interest margins.

• Fixed Income: The Bloomberg Aggregate Bond Index rose as Treasury yields declined across the curve. The 2-year yield fell below the 10-year yield, continuing the un-inversion of the yield curve. Investors eagerly participated in Treasury auctions for shorter maturities, locking in yields ahead of potential rate cuts. A 0.25% rate cut is expected at next week’s Fed meeting, but some speculate it could be as high as 0.50%. The bond market has priced in over 1% of rate cuts for this year, with more to follow next year.

• Commodities: The Bloomberg Commodity Index climbed nearly 3% as oversold conditions and a weaker dollar attracted buyers. Silver soared 10%, while gold gained over 3%, reaching new record highs. Industrial metals also performed well, with copper up nearly 4%. In the energy sector, West Texas Intermediate (WTI) crude rose 2.5%, snapping a four-week losing streak, boosted by supply disruptions from Hurricane Francine and production damage in the Gulf of Mexico. Coffee led soft commodities, jumping nearly 9% due to dry weather in Brazil and Vietnam.

Currencies:

The U.S. dollar fell by 0.2% as lower Treasury yields and speculation of a 0.50% rate cut pressured the currency. The dollar/yen exchange rate slid, hitting key support levels after hawkish comments from the Bank of Japan and weaker-than-expected wholesale inflation.

U.S. Economic Recap (September 8 - 14, 2024)

• Last Week’s CPI and PPI Data: Consumer prices edged up in August, driven mainly by rising shelter costs. Energy prices fell, while food prices remained stable. Producer prices grew at the slowest pace since February, signaling easing inflationary pressures. The inflation data gives the Federal Reserve some room to focus on supporting the labor market, but services inflation may limit the extent of future rate cuts.

Global Markets Recap

Global markets rose but lagged behind the strong gains in U.S. tech stocks. European, Chinese, Japanese, and U.K. markets underperformed, with the Shanghai Composite falling more than 2% due to disappointing Chinese economic data. The European Central Bank’s (ECB) 25-basis-point rate cut provided little relief, as ECB President Christine Lagarde’s comments were less dovish than expected. Japan’s Nikkei 225 rose 0.5% in yen (1.7% in U.S. dollars), and the STOXX Europe 600 Index climbed 1.9%.

Crypto Recap (September 8 - 14, 2024)

• Swift Tests Tokenized Asset Solutions: Global financial messaging network Swift announced plans to test multi-ledger settlement methods for tokenized securities. This would enable real-time transactions between fiat currencies and tokenized assets. Swift aims to create solutions to bridge traditional financial systems with emerging digital asset types.

• Bitcoin Faces 'Extreme Fear' Sentiment: The Crypto Fear & Greed Index (explained in Issue #46) dropped to a one-month low of 22, signaling rising market anxiety. Analysts warn of a potential Bitcoin correction below $50,000 as market sentiment hits its lowest level since early August.

Here are other key highlights from last week:

• Mastercard buys AI cybersecurity firm, Recorded Future, for $2.65B.

• SingularityNET, Fetch.ai, and Ocean Protocol launch FET token on Cardano.

• Tune.FM, music streaming project on Hedera blockchain.

• Polygon Labs and Fabric Cryptography unveil custom ZK chips.

All eyes on Fed’s interest rate decision this week!

This week’s key U.S. Events:

• NY Fed Manufacturing Index (Mon.): Unexpectedly rose to 11.5, the highest since April 2022, beating estimates of -3.9.

• Retail Sales (Tues.): Retail sales beat expectations, rising 0.1% instead of the anticipated -0.2%, despite some seasonal slowdown in August.

• Industrial Production (Tues.): U.S. industrial production rose 0.8% in August, partially offsetting July's 0.9% decline.

• Building Permits (Wed.): Building permits increased 4.9%, the biggest jump since August 2023.

• Housing Starts (Wed.): Housing starts came in above expectations at 1.36 million units in August, driven by a 5.2% rise in single-family homes.

• Fed Policy Decision (Wed.)

  • The results are in as I write this week’s issue:

    • The Federal Reserve cut interest rates by 0.50%, bringing the rate down to 5.00%.

    • Consensus expectations had predicted a 25 basis point cut.

Upcoming Key Events:

• Jobless Claims (Thurs.)

• Philly Fed Manufacturing Index (Thurs.)

• Existing Home Sales (Thurs.)

Fed Speakers:

• Fed Chair Powell Press Conference (Wed. 2:30 PM ET)

• FOMC Member Harker is scheduled to speak at Tulane University in New Orleans on Fri.

Earnings Releases:

Earnings releases are light this week. The ones to watch closely are highlighted in red.

Global Economic Events This Week:

• Monday, September 16: German ZEW Economic Sentiment

• Tuesday, September 17: Canada CPI

• Wednesday, September 18: UK CPI, New Zealand GDP, Australia Unemployment Rate

• Thursday, September 19: BoJ Interest Rate Decision, UK Bank Rate Decision

• Friday, September 20: UK Retail Sales, Canada Retail Sales, ECB President Lagarde Speaks

Trading Tip:

While past performance doesn’t guarantee future success, chart patterns often follow historical trends, making them useful guides for potential market movements!

Week 9/08/24 - 9/14/24 Recap

Special Tools and Strategies

In previous articles, I wrote about Soft Commodities. So, what exactly are they, and how are they different from hard commodities?

What is a Soft Commodity?

A soft commodity refers to futures contracts for agricultural products like soybeans, coffee, cotton, and sugar that are grown rather than mined. These commodities have been traded for centuries and are essential in global trade. Farmers use futures markets to hedge risk, while investors and speculators seek profits from price fluctuations.

Key Differences Between Soft and Hard Commodities

Soft commodities, such as crops and livestock, are grown and harvested, while hard commodities, like metals and oil, are extracted from the earth. This distinction is important because soft commodities are more influenced by environmental factors, such as weather and climate, whereas hard commodities depend on mining and extraction processes.

Factors Influencing Soft Commodity Prices

Several factors drive soft commodity prices, including:

1. Weather and Climate: Droughts, floods, and storms can affect crop yields, leading to price fluctuations.

2. Government Policies: Subsidies, tariffs, and regulations directly impact supply and demand.

3. Supply and Demand: Global population growth and shifting dietary habits influence demand, while technological advancements can impact supply.

4. Geopolitical Events: Political instability can disrupt the supply chain.

5. Currency Exchange Rates: Fluctuations in currency values can affect the cost of commodities in global trade.

Trading Soft Commodities

Traders and investors can participate in soft commodity markets through various instruments such as:

• Futures Contracts: Lock in future prices of commodities.

• Options: Right, but not obligation, to trade at a specific price.

• ETFs: Funds tracking soft commodity indices.

• CFDs: Contracts based on the price movement of a commodity.

Soft Commodity Examples

• Cocoa: Traded in dollars per metric ton, where one contract equals 10 metric tons.

• Coffee: Traded in cents per pound, with one contract representing 37,500 pounds of coffee.

• Cotton: Traded in 50,000-pound contracts, typically priced in cents per pound.

• Sugar: Contracts for "Sugar No. 11" represent 112,000 pounds of sugar.

Understanding these elements and keeping an eye on market developments, traders and investors can make more informed decisions and better navigate the often volatile soft commodities market.

Disclaimer: This newsletter is strictly educational. The information this report provides does not constitute investment, financial, trading, or any other advice. You should not treat any of the report’s content as such. Please be careful and do your research.