Dear Trader,
The 30-year Treasury yield touched 5.4% this morning, its highest level since 2004.
Back then, the hottest phone in America flipped open and Facebook only let in college kids. We went through today's headlines looking for a reason to expect yields to come back down, and we came up empty.
Diesel hit a record $6.52 a gallon this week, so filling both tanks on a big rig can now run you close to two grand. The White House's fix: ban diesel exports. The fuel experts reacted like a mechanic watching you patch a blowout with duct tape, and crude already sits within spitting distance of $100.
Then New York Fed President John Williams flew to London to tell a room full of economists that another rate hike before year-end sounds reasonable to him.
Of the 18 Fed policymakers, 16 already penciled one in, so if a rate cut made your holiday wish list, I'd start shopping for a backup gift.
And if you own utilities, real estate, or bank stocks, you've already seen what this week did to your account.
Mark Sebastian hosts State of the Market today, and he's dragging Tim Colby in as his guest. They'll pick apart all three of these stories, plus plenty more, live in the room at 10 AM ET.
Grab your seat with the link below and add it to your calendar so you don't miss it.
Bring your coffee and your questions, and read the summaries underneath if you want a head start.
This link adds State of the Market to your calendar.
The Daily News Breakdown
SIREN: The White House is reportedly getting ready to slap a 90-day ban on diesel exports, and the fuel experts Yahoo Finance talked to hate the idea. Diesel averaged a record $6.52 a gallon on Wednesday, and with the midterms coming, farm groups and Republicans on the Hill want relief now.
The U.S. ships about 1.67 million barrels of diesel a day overseas, roughly 18% of the world's supply, because foreign buyers pay more for it. Lock that fuel at home and GasBuddy's Patrick de Haan says refiners could cut production while the global shortage keeps prices high anyway.
Washington banned crude exports after the 1970s oil embargo, and Brookings found it did little to bring prices down. Some people have to touch the stove twice.
SIGN: The 30-year Treasury yield hit 5.4% Thursday morning, its highest level since 2004, as stock futures slid. Oil pushing toward $100 on the diesel-ban talk and hotter-than-expected business activity data stoked inflation fears, and traders now put the odds of an October Fed hike at 70%.
So far, the selling has mostly landed in rate-sensitive sectors like utilities, real estate, and financials. The number that made me put my coffee down comes from Bank of America: interest on the federal debt reached a record 3.3% of GDP last quarter.
Back in 2007, with the 10-year near 5%, that figure sat at 1.7%. BofA thinks yields may need to climb a lot further before Washington gets serious about spending, and I wouldn't bet on Congress flinching first.
SNEAKER: New York Fed President John Williams said Thursday it's reasonable to think the Fed might need to raise rates again before year-end. Speaking at a conference in London, he called market forecasts for another hike a sensible read.
Then he gave the classic Fed hedge: they'll collect the data and do what they did between July and September. That stretch ended with a quarter-point hike on Sept. 16 under new Chairman Kevin Warsh, taking the policy rate to 3.75%-4.00%.
At that meeting, 16 of the 18 policymakers signaled at least one more hike before the end of 2026. If you're still waiting on a rate cut this year, I admire the optimism.