Stocks Surge After Fed Announcement

March 18, 2009 07:00 PM

Julianne Johnston Pro Farmer Senior Markets Editor

From Pro Farmer

Updated as of 7:00 a.m. CT

Stocks surge after Fed Announcement... The Federal Open Market Committee (FOMC) at the conclusion of their policy-setting meeting today said they would work to improve liquidity by increasing the size of the Federal Reserve's balance sheet. Immediately following the announcement, the Dow Jones Industrial Average and Treasuries rallied sharply, while the dollar plunged. Financial markets responded with sharp gains as investors say this could be the move needed to get the economy out of its long-lasting recession.

The U.S. dollar continued Wednesday's sharp plunge overnight in reaction to the Fed plan. The weak dollar helped trigger strong gains in commodities overnight, and also negatively impacted some overseas stock markets.

If these price trends continue today, it would be supportive for the commodity markets, as the dollar has violated uptrending support drawn off winter reaction lows.

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Opening calls. These calls originate more than three hours before the open -- use caution, things change:

Corn: 9 to 10 cent higher. Futures were sharply higher overnight on help from outside markets. Futures closed 1 to 2 cents lower yesterday, staying fairly close to unchanged through the day. Upside potential was limited by mixed outside markets yesterday, so how outside markets perform today will be important -- as well as the weekly export sales data. May corn spent the day pivoting around support at yesterday's low to remain within the boundaries of the uptrend established from the February low. Futures need consecutive closes above $4.00 to signal a near-term low has been posted.

Soybeans: 28 to 29 cents higher. Futures were higher overnight on spillover from the Fed announcement. Futures closed with a mixed tone, with old-crop firmer. How outside markets perform will be influential to the soy complex today. Technically, May soybean futures continue to inch higher following Monday's big upside day. But the contract has yet to clear the 40-day Moving Average (at $9.27 1/2). A push above that resistance could trigger buy stops, along with a move above old support at $9.40.

Wheat: 12 to 13 cents higher. Futures saw support from outside markets overnight. Futures extended losses in late trade to finish sharply lower and near session lows. Fundamental pressure came from news Egypt snubbed the U.S. on its latest wheat purchase. While this wasn't a surprise, it served as a stark reminder that U.S. wheat is not competitively priced on the world market. May Chicago wheat futures posted a bearish reversal after poking above Tuesday's highs and running out of buyers. Near-term support extends from $5.11 1/2 to $4.98 1/2.

Cash cattle expectations: Beef movement improves. Boxed beef movement increased to 347 loads Wednesday, but it took a $1.27 drop in Choice cuts and a 38 cent decline in Select cuts to trigger the stronger beef sales. Unless cattle futures surge on strength in outside markets Thursday, feedlots are likely looking at steady-at-best cash cattle bids around $81 in the Plains this week.

Futures call: Firmer. Futures are called to open firmer based on expected spillover from strength in the stock market. However, if stock market gains subside, it would limit buying in the cattle pit. Choppy price action is possible as traders wait on cash trade to develop.

Cash hog expectations: Steady to lower. Cash sources signal most packers have turned their attention to securing supplies for next week as this week's slaughter runs have been filled up. As a result, cash hog bids are expected to remain steady to weaker across the Midwest. With margins back in the black, packers may increase late-week kill runs, but they won't have problems securing extra supplies at lower cash hog prices.

Futures call: Firmer. Futures are expected to open firmer based on expected strength in the stock market. Upside potential, however, should be limited as futures are trading at a premium to the cash index. Key short-term boundaries for April lean hog futures lie at the March 11 low at $60.25 and the February reaction high at $64.05. Violation of this support or resistance would trigger an extended price move.

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