Page One
Briefing.com Summary:
*Oil prices continue to push higher as a U.S.-Iran truce remains elusive.
*Treasury yields have eased a bit but remain nervous about more rate hikes.
*President Trump and President Ci meet today at the White House for bilateral meeting.
The interplay between oil prices and interest rates was on display yesterday. The top billing, however, belonged to interest rates, which spiked along the Treasury yield curve following a batch of strong economic data, a contention by Fed Governor Barr (FOMC) that further policy adjustments are likely before the end of the year, rising oil prices, and a weak 5-year note auction.
Treasuries are mixed this morning in front of the $44 billion 7-yr note auction at 1:00 p.m. ET, but the relative underperformance belongs to the inflation-sensitive back end of the curve. The 2-yr note yield is down five basis points to 4.84%, while the 10-yr note yield is down one basis point to 5.10%.
Rising oil prices (WTI +1.7% to $93.73) are a factor, as a truce between the U.S. and Iran remains elusive. The U.S. and China, though, agreed to extend their trade truce by two months to January 10. The downside of that "good news" is that previews suggested an agreement might be for six months or longer.
President Trump and President Xi will meet at the White House today at 10:00 a.m. ET, and a bilateral meeting will be held at 11:30 a.m. ET. Market participants will be eager to hear the outcome of that meeting.
In the same vein, they will be interested to see oil prices and interest rates settle down. There are aftershocks on both fronts today. Oil prices are higher, and New York Fed President Williams (FOMC voter) said it is reasonable to expect another rate hike by year-end.
The Williams remark has not caused as much upset since the market has already priced in at least one more rate hike before year-end. The CME FedWatch Tool shows a 70.9% probability of a 25-basis point hike at the October meeting to 4.00-4.25% and a 52.3% probability of another 25-basis-point hike at the December meeting to 4.25-4.50%.
Currently, the S&P 500 futures are down 38 points and are trading 0.5% below fair value, the Nasdaq 100 futures are down 280 points and are trading 0.9% below fair value, and the Dow Jones Industrial Average futures are down 130 points and are trading 0.3% below fair value.
Semiconductor stocks are among the notable laggards in pre-market trading, along with Meta Platforms (META), which is down 1.7% following its Meta Connect event, which can be labeled a sell-the-news response. META is up 30% this month on the excitement over the introduction of its Muse AI agent. Oracle (ORCL) is another lowlight, trading down 4.0% on a Bloomberg report that it sent a "force majeure" notice to the developer of its New Mexico data center project.
Earlier, some economic data were introduced that didn't change market sentiment.
Initial claims decreased 1,000 to 197,000 (Brieifng.com consensus: 202,000) for the week ending September 19. Continuing claims increased 2,000 to 1.719 million for the week ending September 12.
The key takeaway from the report is that it shows no change in the understanding that layoff activity is quite low, which is reflective of a generally solid demand environment.
The Q2 Current Account Deficit widened to $246.0 billion (Briefing.com consensus: -$221.0 billion) from an upwardly revised deficit of $212.6 billion (from -$228.6 billion) for Q1.
