Midday Mashup
Published
The bond market that set the tone this morning is now the dominant story of the day. The 30-year Treasury yield has pushed to 5.61%, its highest since 2002, as Federal Reserve officials openly resist the idea of looking through the energy shock. Governor Barr said the Fed won't reach its 2% inflation target in a timely way without adjusting policy, while Chicago Fed President Goolsbee called five and a half years of above-target inflation "playing with fire" and questioned the logic of dismissing supply shocks as temporary. That hawkish drumbeat is landing alongside soft data, consumer confidence dropped to 81.9 versus 89.0 expected and August JOLTS job openings came in at 7.079 million versus 7.228 million expected, a combination that leaves the market pricing higher-for-longer rates against a cooling labor backdrop.
Oil is telling a different story. Brent crude fell more than 2% as signs emerged of recovering Middle East crude flows, even after reports of a drone strike near the southern Hormuz route. The US has offered up to 40 million barrels from the Strategic Petroleum Reserve, and Washington is pressing Europe to draw down its own diesel and refined-product reserves rather than let export bans tighten the market further. Goolsbee said oil prices could fall relatively quickly, though restoring refinery operations remains the harder problem. Trump reiterated that the Iran standoff will be over soon and that oil prices will "tumble."
Equities reflect that split. Carnival jumped 12.9% after beating on both earnings and revenue and raising its full-year adjusted income outlook, dragging Royal Caribbean up 6.3% in sympathy as easing crude flows lower the fuel-cost overhang for cruise operators. Cboe Global Markets gained 5.0%, and chip-equipment-linked names Arm Holdings and Lumentum Holdings rose 5.4% and 5.3%. On the other side, Fair Isaac extended its collapse to -26.5%, with United Rentals down 4.7%, Equifax off 4.2%, FactSet Research down 4.2% and Voyager Technologies down 4.1%.
The net effect is a market pulled two directions at once: falling oil easing the near-term inflation scare even as long-end yields climb on a Fed that sounds unwilling to look past it.