foxex: Jacked!

The Market Sum | Insight after the bell

By Caleb Silver, Editor in Chief

Tuesday's Headlines

1. Markets Pop on Fed Assurances
2. Farmers Feeling the Pain

3. Tesla Posts Best Day of the Year

4. King Corn's Soggy Season

Markets Closed

Dow
25,332.18 +2.06%

S&P
2,803.27 +2.14%

Nasdaq
7,527.12 +2.65%

VIX
16.97 -10.02%

Bitcoin
$7,716.33 -9.82%

US 10-Yr Yield
2.119 +1.83%

Markets Pop as Fed Reassures Investors

Pow! Or should we say, "Powell!" Jerome Powell, the Federal Reserve Chairman, came through in the clutch again today, assuring investors that the Fed will do what it takes to keep the economic expansion going.

Here's what he actually said:

"We are closely monitoring the implications of these developments for the U.S. economic outlook and, as always, we will act as appropriate to sustain the expansion, with a strong labor market and inflation near our symmetric 2 percent objective."

This is how investors interpreted it:

Both the DJIA and the S&P500 popped over 2% on the news, chalking up their second best day of the year. The Nasdaq climbed 2.65%, easily erasing yesterday's losses and wiping away concerns over the regulatory probes facing Google, Facebook and Apple. Big rallies will do that, but those problems have not gone away.

Many investors and high-ranking politicians have been clamoring for the Fed to cut interest rates as the economy slows and the trade wars rage on. Powell and the Fed have said they will be patient before they make any moves, but today's comments are being interpreted as a sign that the Fed is here to help, and will do what it takes.

So accommodating.

It shouldn't come as a surprise that the odds of an interest rate cut during the Fed's September meeting, according to the CME's Fed Watch Tool, have now jumped to 90%. Just last week, those odds were around 70% for an interest rate cut during the December meeting. The implication is that traders are betting the Fed will cut sooner, and potentially deeper.

The Other Reason...

Was China-U.S. trade talks, of course. Beijing and Washington have been playing the blame game for the past several weeks, but just this morning, The Chinese Commerce Ministry reportedly said the trade talks will need to be solved with, "dialogue and mutual respect." Sounds reasonable and promising.

This comes after the Trump Administration blamed China for blowing up the negotiations and Sunday's release of a white paper by the Chinese government that outlines its history and position on trade. That white paper was seen by many in Washington as a wall between the two sides that would prevent progress. Make no mistake, China and the U.S. need each other. They are each other's biggest customers and China is the largest holder of U.S. debt.

Side Note: I joined MSNBC's Ali Velshi on TV today to discuss this and more.

Click here to watch the video, if you are interested.

Farmers are Feeling it

We've written a lot about the trade war's impact on industries like autos, metals, apparel and heavy equipment, but what often gets overlooked is the impact it is having on farmers. U.S. farmers exported $9.2 billion worth of goods to China in 2018, which is down from $12.1 billion a decade ago, according to the USDA.

Soybeans, one of the main crops China imports from the U.S., fell 98% in 2018. Since the trade war began, China has turned to Brazil and other countries for that crop, pinching U.S. farmers who were already dealing with higher costs and shrinking margins. Intense flooding in the midwest this Spring has only amplified their problems, leading to serious anxiety on the farm.

(James has more on how Corn prices have been impacted this year in our daily chart, below.)

Purdue University and the CME Group track U.S. farmers sentiment on a monthly basis to gauge how they are feeling about present and future conditions. As you might expect, they are not feeling too good right now. The indexes for both present and future conditions plunged 24% in the month of May.

More News:

Why Colombia Poses a Threat to Cannabis Stocks

Goldman Sees 12 'Crowded' Stocks Leading Amid Trade Wars

CVS Rebounds From Support as It Outlines Growth Plans

Tesla Roars Back to Life

Before we get into our top gainers, below, it is notable that Tesla had one of its best days in months today. Though not on our list of top movers below, the stock popped 8% today. There was no tangible news on the company today, but it is notable that it is the worst performing stock in the Nasdaq 100 year-to-date, down 42%. It has been beset by production issues and slack demand. Ironically, its CEO, Elon Musk, has not been the source of its issues, at least not this year. We'll see if this mini-rally has more in the tank.

chart courtesy www.koyfin.com

Mattel's shares jumped almost 12% today on news that the company had reached a licensing deal with the Japanese company Sanrio to design and develop products based on Sanrio's brands, including Hello Kitty.

Nektar shot up yesterday on news of potential breakthroughs in cancer treatment, but apparently investors think it did so too much too quickly, as the stock dropped more than 3% today.

Word of the Day

Relief Rally

With all three of the major indices popping today after weeks of falling, we thought we would just give y'all the definition of what happened today - it was a relief rally. Often relief rallies come on the heels of bad news that is not quite as bad as expected. In this case, it was because Fed Chair Jerome Powell seemed to suggest that interest rates would be staying low.

"A relief rally is a respite from market selling pressure that results in an increase in securities prices. Sometimes it happens when expected negative news ends up being positive, or it's less severe than expected."

photo Ivan Boesky, courtesy AP

Today in History

June 4, 1987: The first big domino falls in Wall Street's insider-trading scandal as Kidder, Peabody & Co. pays a $25.3 million fine to settle Federal charges of securities fraud. The U.S. Securities and Exchange Commission claims that Kidder illegally parked stock for Ivan Boesky, taking shares of Unocal off his hands temporarily to conceal his ownership and protect him from loss -- and that Kidder takeover maven Martin Siegel had traded on inside information on at least six stocks.

The Wall Street Journal, June 5, 1987, p. A3.

Chart of the Day: Corn Prices Spike on Midwest Flooding

We don't typically discuss soft commodities much, but the recent surge in corn prices has been too dramatic to ignore. There have clearly been severe concerns recently that U.S. trade conflicts with China (and now, Mexico), could weigh heavily on international demand for U.S. agricultural commodities like soybeans and other grains. This is due to the fear that retaliatory tariffs by U.S. trading partners that import American commodities would result in dramatically lower demand for those products. While this expectation of lower demand indeed suppressed commodity prices for much of this year, something altogether unrelated has prompted the massive spike in corn prices.

So far this spring, a relentless deluge of rain and flooding in the Midwest has led to historic delays in planting crops. Generally, early June is the latest time in the season that corn can be planted successfully. In late May, the U.S. Department of Agriculture reported that less than 60% of the full corn crop had been planted. Clearly, this does not bode well for the U.S. corn supply this year. This devastating situation for U.S. farmers has resulted in corn prices that have risen rapidly to highs not seen for nearly three years. In the latter half of last week, the price of corn futures rose to approach the highs of mid-2015 and mid-2016. Overall, since mid-May, corn futures have soared well more than 20% in just around three weeks.

Where might the price of corn futures go from here? Key long-term resistance is around the 440 level (around the noted mid-2015 and mid-2016 highs). But if conditions persist, we could potentially see a major breakout to higher highs.