Market Barometer for September 22, 2021 – U.S. markets closed higher as investors mulled over Federal Reserve comments …

Commodities, Futures, Stock Market, Trader Talk, Widman

U.S. markets closed higher as investors mulled over Federal Reserve comments that indicated the Central Bank would reduce its monthly bond purchases and that interest rate increases may follow more quickly than expected in 2022. In New York, the Dow Jones gained 338.48 points to 34,258.32, the S&P 500 added 41.45 points to 4,395.64 and the Nasdaq Composite rose 150.45 points to 14,896.85. Canada’s main stock market closed higher today buoyed by higher commodity prices. In Toronto, the S&P/TSX closed 157.20 lower at 20,401.49.
According to the U.S. Census Bureau and the U.S. Department of Housing and Urban Development, privately‐owned U.S. housing units authorized by building permits in August were 6.0% higher at a SAAR of 1,728,000. This is 13.5% above the August 2020 rate of 1,522,000. Single‐family authorizations were mostly unchanged, up slightly by 0.6% to a rate of 1,054,000. Authorizations of units in buildings with five units or more were 19.7% higher at a rate of 632,000
in August.
Privately‐owned U.S. housing starts in August were 3.9% higher at a SAAR of 1,615,000. This is 17.4% above the August 2020 rate of 1,376,000. Single‐family housing starts in August dropped 2.8% to a rate of 1,076,000, while the August rate for units in buildings with five units or more jumped 21.6% higher to 530,000.
At the close of trading today, iShares S&P Global Timber & Forestry Index ETF (WOOD) finished a strong session with an above-average trading volume up $1.71 (or 2.01%) at $86.80. Today was the first day that WOOD has closed higher following a 4-day sell-off that began last Thursday. WOOD is trading in the after hour market but remains unchanged.
The Invesco MSCI Global Timber ETF (CUT) closed at the end of trading today with below-average trading volume up $0.51 (or 1.40%) at $37.04. Today’s close marks the third consecutive day CUT has traded higher.
CME lumber futures are moving in sideways to a higher pattern within the $600-$630 per Mbf trading range. This sizable premium-to-cash position has the nearest contract pegged about $150 over our printed cash price for W-SPF today at around $475 per Mbf. While the November expiration is well over a month away this significant premium gap likely will place the contract under downward pressure moving forward. Over the past 7-days, there were only 23 EFPs, no EFR or block trades.
CME lumber futures final settlements at 3:00 EDT have the new front contract November up $25.00 per Mbf at $627.00. The distant back month contract January closed $18.00 per Mbf higher at $640.00.
Cash market trading conditions continue to show signs that the market was stronger and improving, but traders expressed an overall ho-hum sentiment to the pace. Mills had decent order files, but while some items were tight, prompt offerings were not that hard to source. WSPF #2&btr 2x4s are quoted in a range of $465 to $475 mill per Mbf. Lumber prices last year at this time were easing off of the blistering pace skyward, moving slightly lower in a range of $930 – $940 mill per Mbf.
With mills moving wood out the door in good quantity and with enough momentum we expect the upside potential for lumber prices will continue to outweigh any downside risk for the short term. Long term into October and early November the multiple market dynamics that we outline in more detail in our Market Direction on page 2 could slow demand from both the construction and DIY segments leading to buyer pull back and price stagnation.

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