Futures are modestly higher in the final week before the midterms.

Futures are off sharply on AI fears and increased attacks in Saudi Arabia that are keeping the pressure on oil prices.

The 10Y is off a bit, but not for “good” reasons.

UPDATE: 4:00PM

Hmm…I wonder who might be trying to keep a $100 lid on WTI?

The struggle to maintain the narrative continues.  The administration is doing a good job of keeping oil prices below $100/bbl…so far.

It hasn’t been easy, as the situation in the Middle East is far from resolved, with reports indicating that Trump will unleash hell after the midterms.

As hard as the Iranisns are pushing to get oil back over $100, Trump et al are working to get it back down. You can see it in the daily volatility with prices being hammered after the close every day.

The same thing is happening with stocks, with most bounces coming during the low-volume after hours.

Futures are up moderately, backtesting the SMA50 following last week’s tumble.

Futures are modestly higher following yesterday’s roller coaster market action. Early weakness was offset…

…by aggressive VIX action as the day went on.  VIX almost kissed its SMA200…

…and the TL from Jun 9 before being hammered.

CL also came under selling pressure that really only amounted to avoiding another higher high.

While TNX made a more definitive pullback from its 1.272 extension.

Warsh spoke at an IMF meeting in Bangkok, promising to tame inflation but not shedding any new light on the Fed’s plans for its Oct 27-28 meeting even though yesterday’s PPI print was quite concerning.

GLTA

Wholesale inflation shot higher last month, soaring to the highest level in over four years. September wholesale inflation rose 1.3% MoM and 6.3% YoY versus expectations of 0.5% and 5.3%. It’s the fastest monthly increase since March 2022 and the highest annual rate since Dec 2022, in the wake of 9.1% CPI.

Retail sales slowed to 0.8% after rising a sugprising 1.3% in August. Keep in mind that retail sales is not adjusted for inflation, so was nearly flat on a net basis.  Also keep in mind that these are the data which has been blessed by the White House. How much worse were the actual data?

Futures are moderately lower as we approach the open.

Equity weakness has been particularly pronounced in the tech sector, with CRWV plunging 15% and ORCL 10%. Even INTC shed 6% and NVDA slumped by 3%. COMP should test its SMA50 today, and is on track to test a TL from Apr 2025 that targets 24855, a 10% correction from its recent all-time highs.

continuing…

Headline CPI rose 0.6% last month after climbing 0.4% in August.  Annual CPI advanced 3.7% versus 3.4% in August. And, core CPI rose 2.6% versus 2.4% last month.

Futures are not amused.

The culprit, of course, is rising oil and gas prices.

And while the 10Y is hesitating…

…the DXY is surging.

When the largest asset manager in the world says to reduce equity exposure, it makes sense to listen. From Marketwatch:

“…bond yields can no longer be ignored, and the world’s largest asset manager is now shifting money into Treasurys — specifically shorter-term paper — while taking some U.S. equity exposure off the table.”

We heard the same from Paul Tudor Jones on CNBC this morning, comparing the current environment to 1999.

“2027 is going to be really, really challenging for the stock market…I’ll be short the whole year. There just — there’s little value,”

Futures are slightly lower ahead of tomorrow’s CPI print.

Like us, Jones is bullish on oil – saying that prices could rise another $25/barrel. I couldn’t agree more – though he suggests it will happen after the midterms while we’re leaning toward before the midterms. Either way, it wouldn’t be great for stocks.

The oil price you see on your computer, about $103 for Brent, is a futures contract for oil delivered roughly two months from now. It reflects traders’ bets that the Iran war’s disruption to Persian Gulf supply will ease by then.

The “actual” price experts refer to is the cost of physical barrels available immediately, and since the Strait of Hormuz was essentially shut down in late February, that price has been much higher. Dated Brent, the benchmark for North Sea cargoes you can take delivery of right now (prompt cargoes), peaked at a record $144 in April. Dubai and Oman crude, the benchmarks for Gulf oil sold to Asia, reached as high as $169.75 in March, before shipping costs.

Normally physical and futures prices differ by $1–2. This year the gap has repeatedly exceeded $20–35, because refiners who need crude right now can’t wait for the futures market’s expected recovery. In addition, buyers pay freight, insurance and financing. So the delivered cost of a Middle Eastern barrel to an Asian refinery can plausibly be around $160 even when headline Brent reads $103.

This matters for inflation because consumers pay physical prices, not futures prices. Gasoline, diesel, jet fuel, freight and petrochemicals are all priced off prompt barrels and product markets, so the headline futures price understates the energy shock moving through economies.

Société Générale notes that diesel is strong enough to imply Brent should be above $150 to restore normal refining margins. The U.S. is partly insulated: it is a net petroleum exporter, and its crude has traded at a record discount to Brent because of its distance from Asian markets.

But refined fuels trade globally, so American diesel, airfares and shipping costs still rise. That pushes up headline CPI and, through transport and goods prices, can feed into core inflation and complicate the Fed’s rate decisions. Oil-importing economies feel the shock much more directly.

Europe, Japan, Korea, India and smaller Asian and African importers pay physical or delivered prices, often in dollars their currencies are losing value against. Analysts flag Southeast Asia and East Africa as the most exposed, and the outcomes there range from sharp inflation to outright fuel shortages.

Demand destruction (the IEA expects global oil demand to contract in 2026) eventually limits how high prices can go. But any such ceiling would come at the cost of slower growth, so the world faces a stagflationary mix rather than a simple price spike.