Yesterday’s breather lasted about a day. Oil is back above $100 a barrel, Treasury yields have climbed straight back up and US stock futures are drifting lower into Wednesday’s open, with the Nasdaq taking the worst of it.
It is not a rout. But it is a reminder that the two things squeezing Wall Street this autumn, expensive energy and expensive borrowing, never really went away. They just had Tuesday off.
The Situation Right Now
S&P 500 futures are down around 0.3%, Dow futures about 0.5% and Nasdaq 100 futures roughly 0.6%, a soft start after the S&P 500 and the Nasdaq both closed at record highs on Tuesday. The S&P finished above 7,800 for the first time, so there is some profit to protect, and traders are in no rush to add risk before tonight.
The pressure is coming from the bond market again. The 10-year Treasury yield is back around 5.33%, up roughly six basis points on the day, and the 30-year has pushed above 5.70%, its highest level since 2002 according to Reuters. Higher yields make cash and bonds more attractive next to shares, and they hit expensive growth stocks hardest, which is why the Nasdaq is lagging.
What Changed Since This Morning?
This morning’s brief set out three hurdles for the record run: oil, bonds and the Fed. Since then the first two have both got taller. Brent has climbed from around $101.50 early this morning to almost $102, its highest of the day, after the Houthis claimed fresh strikes on Saudi airports and as a storm in the Gulf of Mexico threatens US oil and refining.
Europe has had a rough session too. The Stoxx 600 is down about 1%, Germany’s DAX close to 1.4% and the FTSE 100 around 0.7%, with banks leading London lower as gilt yields rise. French borrowing costs have jumped again, with the 10-year yield up around 16 basis points to roughly 4.9%, and the head of the IMF told Paris to “get your house in order”. The calm in French bonds that helped the euro on Tuesday has not survived the morning.
The Biggest US Market Story
The real story is that the bond market does not believe Tuesday’s relief either. Tuesday’s $58 billion three-year auction cleared at the highest yield since 2006 with weaker demand than usual, and today brings a $39 billion sale of 10-year debt at 18:00 UK time. If buyers are cautious again, that tells you the pressure on long-term borrowing costs is not finished.
There is also a new twist from the AI boom. The Financial Times reports that SpaceX is seeking around $40 billion of financing to buy Nvidia chips, roughly $10 billion of bank loans and $30 billion of investment-grade debt, with Apollo leading. Analysts at Vital Knowledge have warned that AI spending is likely to come with a “tidal wave” of debt issuance. Every one of those bonds competes with US Treasuries for the same pool of money, which is one more reason yields are struggling to fall.
Then there is the Fed. Markets put around a 78% chance on the Fed holding rates this month, according to CME FedWatch, but a December rise is still largely priced in after September’s hike to 3.75% to 4.00%, the first increase since 2023. The minutes of that meeting land at 19:00 UK time and could show how many policymakers wanted to go further.
Stocks Moving Before The Bell
Constellation Brands is down around 4.5% to 5% after its results. The Corona and Modelo owner beat on profit and sales, but beer depletions, a measure of how much distributors sell on to shops and bars, slipped 0.6% and the full-year outlook disappointed. Modelo Especial and Corona Extra volumes both fell, a sign that American drinkers are being more careful with their money.
SpaceX is about 2% lower on that $40 billion financing report, as investors worry about how much the company is borrowing and spending. Chip stocks are softer after Tuesday’s rally, with Micron down around 2.2% and Marvell about 1.2%, while Intel is up roughly 1.3% after Bloomberg reported it will keep working on Elon Musk’s Terafab chipmaking venture. Levi Strauss reports after the close.
FX and the Dollar
The dollar is back on the front foot. The dollar index is up about 0.5% near 102.3 as higher Treasury yields and dearer oil pull money back into the greenback. The euro has dropped around 0.6% to near 1.119, giving back Tuesday’s bounce and heading back towards Monday’s 17-month low near 1.116 as French bonds sell off again.
Sterling is down about 0.4% near $1.322, although it is holding up a little better against the euro. The yen remains weak around 158.3 to the dollar, close enough to 160 to keep the threat of Japanese intervention in the background.
Bonds
This is still the market that matters most for shares. The 10-year Treasury at around 5.33% is close to Monday’s high near 5.35%, the highest since 2002, and the 30-year is above 5.70%. In the UK, the 10-year gilt yield is up around nine basis points near 5.47%, which helps explain why London banks are under pressure and why investors are nervous ahead of the Budget on 28 October.
Commodities
Brent is up about 1.3% near $101.90 and WTI is up around 0.6% near $90. The supply worries are piling up: Houthi attacks on Saudi Arabia, continued strikes on ships near the Strait of Hormuz and a storm in the Gulf of Mexico. The International Energy Agency is meeting today over a proposed release of oil and diesel stocks, but the details are not expected to be settled until next week.
Gold is having a poor day, down around 1.1% near $4,140 an ounce, and silver is off more than 2%. That makes sense: a stronger dollar and higher yields make a metal that pays no interest less attractive.
Today’s Remaining Catalysts
The US cash market opens at 14:30 UK time. US crude inventory data from the Energy Information Administration follows at 15:30, and Minneapolis Fed President Neel Kashkari speaks at 15:40. The big hour is 18:00, when the 10-year auction results arrive and President Trump is due to speak, followed by St Louis Fed President Alberto Musalem at 18:40 and the FOMC minutes at 19:00. Levi Strauss reports after the US close.
Levels Traders Are Watching
For the S&P 500, Tuesday’s record close near 7,819 and the 7,800 area are the first references, with futures trading around 7,852. For the Nasdaq 100, the question is whether chip stocks can steady after leading the market to a record. In bonds, Monday’s high near 5.35% on the 10-year and 5.70% on the 30-year are the lines that matter. For oil, $100 on Brent and $90 on WTI are the round numbers in play. In currencies, the dollar index around 102, the euro near Monday’s low of 1.116 and 160 on dollar-yen are worth keeping an eye on.
Where That Leaves Us Into The Bell
Our read is that the bias into the open is mildly negative and cautious rather than alarmed. The evidence is plain enough: yields are higher, oil is back above $100, the dollar is stronger and futures are lower, with Europe already having a bad day. What is holding the market up is the earnings story. Analysts expect S&P 500 profits to grow by around 30% in the third quarter, according to LSEG, and that season starts with the big banks next Tuesday.
The opportunities are likely to sit with energy names, which benefit from dearer oil, and with single-stock stories such as Intel. The risks are a weak 10-year auction, a hawkish set of Fed minutes or another jump in oil, any of which could push the 30-year yield further into territory not seen since 2002. What would change the view is the bond market: a 10-year yield back below 5.27%, where it was on Tuesday, would put the relief rally back on, while a clean break above 5.35% would make life harder for shares. The markets to watch are the 10-year and 30-year Treasury, Brent, Nasdaq 100 futures and the dollar index.
For beginners, the lesson is that a record high does not make a market safe. Shares can climb while bonds and oil are flashing warnings, but when yields and energy costs turn up together, growth stocks usually feel it first. This is an educational view of the market, not advice to buy or sell anything.
If you want to see how you would handle a day like this, where the relief fades and the big tests are still to come, the free Samuel & Co Trading trader assessment is a good place to test your own approach.
