The story of this week:

 

Market Volatility- Stimulus Will Lead To A New Reality

 

It was a volatile week in markets. The week started with a new low in stocks on March 23, but they recovered by the end of the week. The swings in the leading indices were unprecedented; the S&P 500 index posted a double-digit percentage gain over the week as the US Fed continued to fire bazookas full of liquidity at markets. At last glance, the Fed’s balance sheet rose to the $5 trillion level, an all-time high, and continued to move higher. The US government approved a $2 trillion stimulus package, which provided some degree of support for markets. Unemployment rose by over five times the last record increase, and that will continue.

Crude oil closed the week at $21.51 on the nearby May futures contract on the NYMEX division of the CME.

Source: CQG

Crude oil settled on Friday at just above the recent low.

Source: CQG

Gold made a significant recovery from the March 16 low of $1450.60, closing Friday at $1625 per ounce. Other commodity prices came back from lows along with stocks. When it comes to gold, rising deficits and unprecedented stimulus are supportive of the price of the yellow metal.

Meanwhile, New York City is now the epicenter of the pandemic in the United States. The number of cases and the death toll continues to rise around the world as scientists work feverishly on treatments and a vaccine. The crisis will end, but the economic fallout will last for many years. The longer it takes science to come up with an answer, the deeper the financial hole. However, the health and wellbeing of people around the world continue to transcend economic travails. As the world emerges from the pandemic, and it will, picking up the pieces will require a new reality. I am hopeful that the Coronavirus teaches the world a lesson that we are all brothers and sisters. The virus does not discriminate based on nationality, race, religion, sexual orientation, wealth, political ideology, or any other factors that divide human beings. The lesson is that life is fragile, and we cannot take it for granted. Markets will come back; optimism and hope are far more constructive than pessimism and despair.

The stimulus will change tax policy, markets, and many other things that were status quo just one month ago. Commodities are the essential products that people depend on for nutrition, shelter, clothing, and to power their lives. While we will see a continuation of price volatility in all markets, raw materials support the basic needs of people. Volatility in markets creates opportunities. Keep stops tight and take profits when they are on the table. Approach all markets with a plan and stick to it during these uncertain times.

Highlights in commodities:

  • April gold rises 9.46% on the week and settles at $1625.00 per ounce but the yellow metal underperforms silver, platinum, and palladium
  • May silver gains 17.35% as the precious metal settled at $14.534 per ounce on March 27- The silver-gold ratio declines to the 112:1 level
  • Platinum turned higher by 18.92% on the week. April platinum was at an $884.70 per ounce discount to April gold futures, which widened since last week
  • June palladium up an incredible 44.58% and settled at $2,226.80 per ounce. Rhodium recovered and more than doubled to $8,000 per ounce over the past week
  • May copper was only 0.02% higher to the $2.1720 level since March 20 as it held the $2 level over the past week
  • May iron ore futures moved 1.74% lower over the past week
  • The BDI fell 7.62% since March 20 to the 582 level
  • May Rotterdam coal rose 4.74% since last week on a sign of Chinese demand
  • May lumber fell 3.41% lower since March 20 and was at the $311.30 per 1,000 board feet level
  • May NYMEX crude oil was 9.01% lower and closed the week at $21.51 per barrel
  • May Brent crude oil fell 7.34% as Brent outperformed NYMEX crude oil
  • The premium for Brent over WTI in May closed Friday at the $3.09 level as the spread moved $0.16 higher since last week
  • May gasoline fell 3.82% while May heating oil futures posted a 4.63% gain over the past week
  • The gasoline crack spread in May was 39.69% higher since last week. May heating oil crack moved 20.52% higher since March 20
  • Natural gas rose 1.46% on May futures closing the week at $1.6710 per MMBtu after trading to a twenty-five-year low at $1.519 on the expiring April contract on March 23. The EIA reported a withdrawal of 29 bcf from storage on Thursday for the week ending on March 20
  • May ethanol fell 0.20% on the week
  • May soybeans rose 2.20% since last week on fears of bottlenecks at South American ports
  • May corn moved 0.65% lower on the week on the back of energy prices
  • CBOT May wheat was 5.93% higher since last week. May KCBT wheat trading at an 84.50 cents discount under May CBOT wheat as the discount moved 14.25 cents away from historical norm since last week
  • May sugar rose 1.74% since March 20 and closed at 11.10 cents per pound
  • May coffee posted a 3.22% loss since last week
  • May cocoa rose 1.21% since March 20
  • May cotton fell 4.38% since last week as the fiber futures were at the 51.33 cents per pound level
  • May FCOJ futures rose 11.98% since the previous report to $1.1820 per pound
  • June live cattle fell 0.75% since last week
  • May feeder cattle were 2.26% higher since March 30
  • June lean hog futures moved 6.34% lower over the past week
  • The March dollar index futures contract fell 4.80% on the week to 98.537 in volatile trading. The dollar rose marginally above the early 2017 high in a flight to quality buying but reversed lower of the past week
  • June Long-Bond futures were trading at 180-25 up 2-22 for the week
  • The Dow Jones Industrial Average closes at 21,637 on Friday, March 27, up 2,463 points from March 20 as stocks had the best week since the 1930s on the back of the stimulus. The S&P 500 rose 10.26% since last week. The VIX was trading at around 65.54 on Friday down 0.50 on the week
  • Bitcoin was trading at $6,666.84 on Friday up $764.55 or 12.95% since March 20
  • Ethereum was trading at $137.10 on Friday, up 10.98% since the last report

 

Price Changes for the week:

DBC closes at $10.94 per share, up 48 cents since March 20

Source: Barchart

DBC is the Invesco DB Commodity Tracking product which represents a diversified basket of commodities futures contracts, has net assets of $1.09 billion and trades an average daily volume of 1,860,553 shares. The fund summary for DBC states that it holds a diversified group of commodities futures but is weighted towards energy. The average volume rose over the past week and net assets remained steady as the price of the ETF posted a gain.

Please stay safe and healthy during these unprecedented times.

Any investment involves substantial risks, including, but not limited to, pricing volatility, inadequate liquidity, and the potential complete loss of principal.  This document does not in any way constitute an offer or solicitation of an offer to buy or sell any investment, security, or commodity discussed herein, or any security in any jurisdiction in which such an offer would be unlawful under the securities laws of such jurisdiction.