Diesel Took the Truce. Crude Kept the War.

Four Years Old, and Facing the Highest Yields of the Run

The bull market turned four on Monday. The S&P 500 is up more than 110% since the Oct. 12, 2022 low.

It is climbing with the 10-year Treasury yield at 5.24%, Friday's close. Last week it hit its highest since 2002. Cash bonds are closed for Columbus Day.

The condition has a number. FactSet's consensus puts third-quarter S&P 500 earnings up 29.6% from a year earlier. That would be a third straight quarter above 25%. The forward P/E has slipped to 19.1 from 20.4 at the end of June, even as the index rose about 4%. Earnings, not multiples, have done the lifting since summer.

As of about 7 a.m., the VIX sat near 15.5 and Brent near $106.

Market Implication

Stocks are carrying the highest long rates of this cycle on one condition: profits keep outrunning them. The banks start testing that Tuesday, after one session of bond trading.

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Crude Made a Round Trip. Diesel Stayed Behind.

President Trump posted Sunday that an "ENERGY CEASEFIRE" between Russia and Ukraine was in effect and that both sides had agreed. Oil gave two answers.

Brent settled at $104.72 on Friday. After futures reopened Sunday night, it slid to $102.39, then recovered to about $106 in pre-market trading. Heating oil was still down about 1% at 7 a.m.

The truce is unconfirmed. Ukraine said it would stop striking Russian energy sites if Russia did the same, then reported Russian strikes on power plants in Kyiv and Kharkiv. The Kremlin had confirmed nothing by Monday morning.

A refinery truce would reach diesel first. Ukraine's drone campaign has centered on Russian refineries. Trump also said Friday that Russia would supply more than 300,000 metric tons of diesel to U.S. and global markets. Treasury issued a license waiving sanctions on Russian diesel through April 2027.

For scale, that first shipment equals roughly half a day of U.S. demand. Six senators from both parties say allowing the imports breaks U.S. law and want the plan reversed.

Structural Setup

Diesel is pricing two contested promises: a truce Moscow hasn't confirmed and a supply plan Congress is fighting. Crude is pricing the Gulf. If either promise breaks in the open, the diesel discount has no barrels behind it. The IEA board meets Thursday.

Seoul Sold Its Chipmakers. The Won Rose Anyway.

Korea's Kospi fell 3.65% to 6,384.24, its first close below 6,400 since Aug. 11. It was Korea's first session since Thursday. Samsung Electronics lost 4.38% and SK hynix 4.52%, with foreign investors selling both.

The won went the other way, to its strongest in two years, as local companies sold dollars. A broad exit from Korea usually drags the currency down too. In the U.S., Micron (MU) was indicated about 2% lower at 7 a.m.

Amazon (AMZN) is in talks to buy AI startup Decart for about $7 billion, The Wall Street Journal reported. PitchBook valued Decart at nearly $4 billion in May.

Bitcoin held within about 1% through the oil swing, after U.S. spot bitcoin funds had net outflows of about $679 million last week.

Sector Read

The won suggests this is a memory problem more than a Korea problem. U.S. chips get the first test at the open. ASML on Wednesday and TSMC on Thursday will show whether Monday was positioning or pricing power.

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The Drone Hit the Workaround

A drone struck a tanker at the Sohar anchorage off Oman, outside the Strait of Hormuz. Sohar is where the bypass runs. Shuttle tankers carry Gulf crude out through the strait and hand it to supertankers waiting offshore.

The bypass ties up a big piece of the tanker fleet. Aramco sold more than 60 million barrels for transfer off Sohar after its pipeline to the Red Sea was hit, Reuters reported. Clarksons put about 15% of the world's supertankers in the Gulf of Oman in late September.

Iran's Revolutionary Guards warned Friday they would pursue ships in the wider region that they had not cleared through the strait. No one has claimed the Sohar attack.

Goldman Sachs puts the risk premium in Brent at a little over $20. It raised its December forecast to $90, about $16 below Monday's early trading.

Strikes the Saudi-led coalition blames on the Houthis also hit Riyadh's airport Saturday and Sunday. Asked whether the U.S. would join Saudi strikes, Trump said: "We may." Polymarket traders are betting it won't. Traders price roughly a one-in-five chance of a U.S. strike on Yemen by Oct. 31.

Watch Signal

Goldman's $90 call assumes the bypass keeps working. Gulf of Oman supertanker charters already topped $1 million a day last week. If Sohar starts to price like Hormuz, freight and insurance show it first.

The Dollar Is Rising for Reasons the Fed Doesn't Control

The dollar sits just under last week's 18-month high. Speculators held about $36 billion of bullish dollar bets as of Oct. 6, CFTC data show, up about $9 billion in a week.

Hike bets haven't followed. Kalshi's October hike contract traded at 15 cents overnight. Fading hike odds usually weaken the dollar. Not this time.

What changed sits outside the U.S. The euro has fallen five straight weeks to near $1.12. Gulf attacks may be adding haven demand.

Gold shows the same tension from the other side. China's central bank added gold for a 23rd straight month. Gold still fell about 6.6% in September. For now, 5% Treasury yields look like the stronger pull.

The Read

The dollar trade is big, growing and built on stress in Europe and the Gulf. A cool core CPI wouldn't remove the reasons to own dollars. It would test speculators holding a large and growing long.

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Economic Data: None today. Existing home sales, Tuesday at 10 a.m. September CPI, Wednesday at 8:30 a.m., with core forecast at 0.2%. Producer prices and retail sales, Thursday.

Fed Speakers: Cleveland's Beth Hammack, 12:50 p.m. today. Governor Christopher Waller, Tuesday at 3:45 a.m.

Earnings:JPMorgan (JPM), Goldman Sachs (GS), Wells Fargo (WFC) and Citigroup (C), Tuesday before the open. Bank of America (BAC) and Morgan Stanley (MS), Wednesday.

Overnight: Australia's ASX 200 rose 0.76%, and China's CSI 300 closed lower.

Monday's biggest moves are priced on things the Fed can't touch.

A truce one side hasn't confirmed. A drone at the anchorage that keeps Gulf crude moving. A crowded bet against the euro.

Wednesday's core CPI is the cleanest test. A 0.2% print that leaves the dollar near its high would point to stress abroad as the driver. A hot one puts the Fed back in every one of these trades.