10-Year Back Above 5% | Bessent Testifies | US Seized $61M in Iran Crypto

Yields Are Higher Than Yesterday's High. The Bond Market Did Not Take the Day Off.

Yesterday the 10-year yield briefly touched 5% then pulled back to close at 4.96%. Overnight it crossed 5% again and is holding above it this morning at 5.02%, the highest level since 2007.

S&P futures are down 0.5%. Nasdaq futures are down 0.5%. Dow futures are off 0.7%. Asia closed red across the board. The Hang Seng fell 1%. Korea's Kospi dropped 0.85%.

Barclays flagged it: 5% on the 10-year is a historically important inflection point. Beyond it, rates have typically become a persistent headwind for equities.

Market Implication

Yesterday's pullback from 5% gave the market a brief reprieve. It did not last. The Fed decision lands tomorrow at 2pm. Warsh's press conference at 2:30pm is the real event. A 25 basis point hike is 92% priced. What he says about what comes next is not priced at all.

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US Refineries Are Running at 98% Utilization. There Is No Slack Left.

WTI is above $103 this morning and the story behind it keeps getting worse. Saudi Arabia's East-West pipeline is still shut after drone strikes from Iraq. Houthi forces launched another wave of ballistic missiles and drone attacks into Saudi Arabia overnight.

But there is a second oil story getting less attention. US refineries have been running at 98% utilization for the past four weeks. The global average is 93% to 94% at this point in the year. ExxonMobil (XOM) shut down its Joliet refinery in Illinois after a power outage Sunday. That facility processes 275,000 barrels a day, about 6% of Midwest refining capacity.

Diesel hit $6.23 per gallon nationally, a new all-time record. Heating oil futures surged to $5.17, suggesting more pain ahead. The Chevron (CVX) CEO said at a conference Monday he sees no reason why energy prices would ease anytime soon.

US refineries running near full capacity heading into fall maintenance season is the specific mechanism that turns a Middle East supply shock into a domestic fuel price shock. There is simply no room to compensate.

Structural Setup

Fall refinery maintenance season typically starts now. With utilization already at record levels, any unplanned outage or maintenance shutdown removes supply from an already tight market. Watch refinery utilization data weekly from here.

Industrial Stocks Got Hit Harder Than Chips Yesterday. That Is the Signal Most People Missed.

The Philadelphia Semiconductor Index fell 5.9% on Monday. That got the headlines. But the industrial names that supply AI data centers got hit just as hard and almost nobody is talking about it.

GE Vernova (GEV) fell 8.8%. Eaton (ETN) dropped 7.4%. Vertiv (VRT) fell 7.2%. Johnson Controls (JCI) lost 6.3%. Caterpillar (CAT) dropped 4%. Corning (GLW) was the worst performer in the S&P 500, down 14%.

These are not chip companies. They make the power systems, cooling infrastructure, and fiber optics that data centers actually run on. If AI development slows, data center construction orders slow with it. These names were priced for a decade of uninterrupted buildout. Monday's session repriced that assumption.

The cybersecurity names that surged Monday, Palo Alto Networks (PANW) and CrowdStrike (CRWD) each up more than 13%, are holding those gains in premarket.

Sector Read

The AI slowdown debate is hitting the physical infrastructure layer as hard as the chip layer. Data center power and cooling names are worth watching as a leading indicator of whether the slowdown narrative gains or loses momentum.

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Bessent Testifies Today. He Is Walking Into a 5% 10-Year Yield.

Treasury Secretary Scott Bessent appears before the House Financial Services Committee this morning. His prepared remarks tout the economic isolation campaign against Iran and highlight wage growth for lower-income Americans.

He will face questions he did not write prepared answers for. The 10-year is above 5% for the first time since 2007. His buyback program has done almost nothing to arrest the yield rise. His $6 billion ceiling operation last week fell short by $800 million and yields kept climbing anyway.

Former Fed Vice Chair Richard Clarida said over the weekend that if the Fed hikes Wednesday, more hikes will follow. Komal Sri-Kumar of Sri-Kumar Global Strategies told CNBC this morning that even a 25 basis point hike may not be enough to calm the bond market with oil and tariffs adding to inflation pressure.

Watch Signal

Watch the 10-year yield reaction to Bessent's testimony. Any acknowledgment that fiscal dynamics are contributing to the yield move is a significant admission. Treasury has been attributing the selloff to oil and inflation. If Bessent starts pointing at the deficit, the bond market narrative shifts.

The US Just Seized $61 Million in Crypto Linked to Iranian Oil Sales.

The US Attorney's Office for the Southern District of New York filed a civil forfeiture complaint against $61 million in cryptocurrency it alleges are proceeds from black-market sales of sanctioned Iranian oil to Chinese buyers.

The complaint says Tehran used a network of cryptocurrency actors in China and elsewhere to launder more than $1.5 billion in Iranian oil money intended to benefit the Iranian military and the IRGC.

This is not a rounding error in enforcement activity. $1.5 billion laundered through crypto for a sanctioned government's military is the specific mechanism the US is trying to sever. It matters for the crypto market because it names China-based crypto actors as the conduit, which adds regulatory risk to any exchange with significant Chinese counterparty exposure.

Coinbase (COIN) is down 4.7% premarket. Robinhood (HOOD) is lower. Bitcoin is sitting near $76,800.

The Read

The forfeiture complaint is a signal that crypto enforcement is accelerating alongside the Iran sanctions campaign. Tuesday's Senate vote on the Clarity Act lands into this context. The market structure bill's passage would clarify which crypto assets are securities. Its timing alongside an enforcement action is not accidental.

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Economic Data: Empire State Manufacturing Survey | ADP Employment Report | Johnson Redbook Retail Sales

Fed: FOMC Day One. No public statements. Decision tomorrow 2pm ET. Warsh press conference 2:30pm ET.

Congress: Bessent testifies before House Financial Services Committee

Earnings: Vera Bradley

Tomorrow: Fed rate decision 2pm ET | Retail Sales | NAHB Housing Index

Thursday: Bank of England decision | Bank of Japan decision | Jobless Claims

Overnight: Nikkei flat, Kospi -0.85%, Hang Seng -1%, DAX -0.1%, FTSE -0.3%

The 10-year is holding above 5% for the first time since 2007.

WTI is above $103 after fresh overnight Houthi strikes on Saudi Arabia. US refineries are at 98% utilization with maintenance season starting. Bessent testifies today into a bond market his buyback program has failed to calm.

The Fed's FOMC meeting starts today. The decision lands tomorrow at 2pm. The hike is 92% priced. The question nobody has answered is what Warsh says about the path after it.

Clarida said it clearly: hikes follow hikes. The market will find out tomorrow whether Warsh agrees.