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“When the final result is expected to be a compromise, it is often prudent to start from an extreme position.” – John Maynard Keynes

Morning stock market summary

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Just like yesterday, futures are higher this morning but off their highs from earlier this morning.  Surprisingly, the rally has been accompanied by rising oil prices and higher treasury yields, but news that China has cut the required quarantine time for incoming travelers in half has investors optimistic that the country may further loosen its zero-COVID policy.  Hopefully the outcome today is better than yesterday.

In economic news, Wholesale Inventories rose 2.0% which was below consensus forecasts but the level still remain elevated relative to history with May being the fourth straight month of 2% readings or higher.

In today’s Morning Lineup, we discuss the news coming out of the G7 meetings, overnight moves in Asian and European markets, and a look at polling numbers ahead of the mid-term elections.

Despite strength this morning, commodities have succumbed to profit-taking recently, and the majority of the ETFs tied to the sector have seen declines over the last week.  Leading the way to the downside, Natural Gas (UNG) and the DB Agriculture Fund (DBA) have seen declines of over 5% in just the last week putting them into oversold levels.  While the weakness in commodities has been a welcome development and sparked optimism that inflation pressures may finally be starting to roll over, the majority of these same ETFs are still up sharply YTD.  UNG is up over 77% YTD even after the 6.6% decline in the last week, while the Commodity Total Return ETN (DJP) still sits on a gain of over 25%. In order for investors to really be confident that commodity price pressures have really turned the corner, we’ll need to see the weakness that has characterized the end of the quarter follow through into the second half.

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