TQ Morning Briefing
The 30-year hit a 2002 high again after one day of relief. Houthis fired a ballistic missile at Riyadh airport. Fed minutes drop at 2pm alongside the 10-year auction.
Yesterday's Relief Is Already Gone.
The 30-Year Is Back at 2002 Levels.
S&P futures are down about 0.5%. Nasdaq futures are down 0.8%. The 10-year yield climbed back to 5.337%. The 30-year is at 5.716%, its highest since May 2002. WTI is rising toward $90 after Houthi attacks on Saudi Arabia overnight.
Tuesday's one-day break in bonds did not hold. Yields are back near their highs. Oil is moving higher again. Futures gave up their gains before the open. Europe is down 0.8% to 1.3% across major indexes. French bond yields are rising again.
The session has two hard stops. The Treasury auctions $39 billion in 10-year notes this afternoon, the most watched fixed-income event of the week. The Fed releases its September meeting minutes at 2pm, the same window. Two potential catalysts, same hour, with bond yields already at 24-year highs going in.
Societe Generale analysts flagged several factors combining for a difficult session: hawkish Fed thinking, the oil rebound, fresh record highs in stocks, and reports of SpaceX planning a $40 billion fundraise to buy Nvidia (NVDA) chips, which adds to the corporate debt supply pipeline that has been competing with Treasuries for buyers.
Market Implication
The setup entering the afternoon is as compressed as it has been all week. A strong 10-year auction with dovish minutes would give the market real room. Weak demand with hawkish language would push the 30-year past 5.72% and pull futures lower into the close.
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The S&P Hit a Record. Almost Nobody Participated.
Tuesday's record closed the books on a rally built by a very small group. Since the S&P last hit an all-time high on August 13, seven of the ten largest stocks by market cap rose.
The smallest names in the index went the other direction. Nine of the ten smallest S&P 500 components fell over the same stretch. Norwegian Cruise Line (NCLH), MGM Resorts (MGM), Wynn Resorts (WYNN) and Pentair (PNR) all dropped more than 20%.
Less than half of S&P 500 stocks closed above their 200-day moving average on Tuesday. That number has been falling since August. A record index with most of its members below their own trend line is a market that is technically narrow, not technically strong.
The read for today is that the record is real but fragile. If the 10-year auction goes badly and rates spike, the mega-caps that carried the index higher face multiple compression at exactly the moment the rest of the index has no buffer.
Structural Setup
The equal-weight S&P 500 is down 3.6% over the past month while the cap-weighted index set a record. Watch today whether that gap widens or closes. Closing would signal the rally is broadening. Widening would mean the record is increasingly dependent on five or six names doing all the work.
Houthis Fired at Riyadh Airport. WTI Is Back Toward $90.
Yemen's Houthi rebels fired a ballistic missile at Riyadh's airport and launched a series of attacks on Saudi targets overnight. WTI is rising back toward $90. The attacks come as Middle East crude exports have been recovering through alternative routes and shuttle tankers.
The Houthis are Iran-backed and have been escalating strikes on Saudi infrastructure as they lose territory in Yemen.
Analysts at XS.com noted that their sustained ability to hit oil facilities hundreds of kilometers from Yemen's border keeps the risk of a large-scale supply disruption alive and real.
Chevron (CVX) CEO Mike Wirth pushed back separately on the prospect of a US diesel export ban, telling CNBC's Squawk Box Europe this morning that the policy would be "unwise."
He said restricting exports would raise questions among US allies about whether America is a reliable supplier in a crisis, and that better options exist. The executive order signed Monday allowing red-dyed farm diesel on highways is a different, smaller measure. An export ban of any scale has not happened yet.
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Watch WTI's response today relative to the Houthi headline. If crude rises sharply on the Saudi attack while the diesel spread stays wide, the market is correctly pricing two separate problems. Crude supply risk from geopolitics is one. Refined product scarcity from damaged refinery capacity is another. They have different solutions and different timelines.
Constellation Brands Beat Estimates. Beer Demand Is Slipping.
Constellation Brands (STZ) reported better-than-expected earnings for its fiscal second quarter but fell more than 4% premarket. The company earned $3.74 per share on revenue of $2.63 billion, both above consensus. The problem is below the headline.
Beer depletions, a measure of distributor sales that tracks real demand, fell slightly year over year. Beer operating margins also shrank by 160 basis points. Constellation's beer portfolio, led by Modelo and Corona, has been one of the most consistent consumer staple growth stories of the past decade. A depletion decline is the first sign that the premium beer consumer is pulling back.
This connects directly to the confidence data from last month. The Conference Board's consumer confidence index hit an 11-year low in September. Inflation expectations for the next year are running near 6%. When confidence is that low, even premium brands that held up in past downturns start to feel it at the register.
TQ Execution Bias
Constellation's depletion number is a leading signal for the consumer staples group. Watch how Molson Coors (TAP) and Boston Beer (SAM) trade today on the STZ print. If the weakness reads as Constellation-specific, the market treats it as share loss. If the group moves with it, the market is pricing broader demand softness in premium consumer brands.
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Economic Data: Fed September meeting minutes released at 2pm today
Treasury Auction: $39 billion in 10-year notes today | $22 billion in 30-year bonds Thursday
Earnings today: Levi Strauss (LEVI) after the close
Earnings Thursday: PepsiCo (PEP)
Earnings Friday: Delta Air Lines (DAL)
Overnight: Nikkei -0.9%, Kospi -2%, Stoxx 600 -0.8%, WTI +0.3%
The Record Lasted One Session. Bonds Are Back. Houthis Hit Saudi Arabia.
Tuesday's relief was real while it lasted. One orderly auction and slightly lower yields gave equities enough room to set records. The conditions that produced that relief are gone this morning.
The 30-year is back above 5.71%. WTI is rising on a Saudi attack. Futures are down before the Fed's own account of its last meeting lands at 2pm, alongside the 10-year auction.
The record was narrow. Less than half of S&P stocks are above their 200-day average. Mega-caps carried the index. If this afternoon goes well, the rally may broaden. If it does not, the record sits above a market that never fully believed it.
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