Energy commodities are holding up despite last week’s selling pressure.
No, I’m not talking about natural gas – that rope snapped months ago.
But the rest of the main players – crude oil, heating oil, and gasoline – rebounded heading into the weekend. And when I look at the charts, Friday’s strength might be the beginning of a more sustained advance for energy.
Check out the equal-weight energy index:
It’s finding support where I would expect – the prior-cycle highs from 2018 and a key retracement level off the 2020 low.
US bank stocks big and small took a beating Thursday, with the Bank ETF $KBE posting its largest single-day decline since 2020.
The steep sell-off came on the heels of Silicon Valley Bank’s $SIVB Wednesday announcement of a $1.8B loss, mainly due to accepting unrealized losses in US Treasuries.
Based on SIVB’s acute exposure to the tech industry, you can argue larger banks with more diversified portfolios and clients don’t carry the same risk. And they don’t.
Regardless, the next chart reveals a storm brewing beneath the surface...
Check out bank stocks (KBE inverted) overlaid with the US Treasury 2s10s spread:
I inverted KBE to highlight the strong relationship between banks and the yield curve. The two lines look almost identical over longer timeframes.
Silver is clawing its way back after breaking down from a month-long consolidation and undercutting a critical shelf of former lows.
As we talked about last week, it all comes down to risk appetite. Silver bid speaks to a healthy risk-seeking environment favoring all precious metals.
As promised, I’ll cover the wheat complex this week, rounding out our coverage of the grain markets.
Let’s dive in!
Before we start, check out this breakdown of the different types of wheat varieties. I love to nerd out on this stuff – anything that involves maps, I’m hooked!
Today I’ll cover the most actively traded US contracts; Chicago Soft Red Winter Wheat (SRW), Kansas City Hard Red Winter Wheat (HRW), and Minneapolis Hard Red Spring Wheat (HRS).
The first two contracts trade on the Chicago Board of Trade (CBOT), with soft red wheat first trading on the CBOT in 1877. Minneapolis spring wheat trades on the Minneapolis Grain Exchange (MGEX).
These different types of wheat derive their names from their growing regions, where they initially come to market, and even their protein levels (hard = higher protein, soft = lower protein).
Developed European benchmark interest rates are posting fresh highs. Those potential failed breakouts back in early January have quickly turned into nothing more than false or premature moves.
And while US yields continue to climb, their recent rise pales compared to their European counterparts.
Markets churn sideways, plagued with indecision. But one thing is certain…
The global rising rate environment remains intact.
Developed European benchmark interest rates are posting fresh highs. Those potential failed breakouts back in early January have quickly turned into nothing more than false or premature moves.
And while US yields continue to climb, their recent rise pales compared to their European counterparts.
What does that imply for domestic rates in the coming weeks and months?
For the past year and a half, we have turned to developed European yields for insight into the direction of domestic interest rates.
The analysis proved insightful as the rising rate environment has been global in scope. Europe has given a nice heads-up regarding the direction of yields stateside. And the market continues to support this approach.
