Morning in New York: Oil and Treasuries Could Trigger a Correction

A daily review and forecast of events in the U.S. stock market by Mikhail Denislamov, Deputy Director of Capital Markets Research at Freedom Broker.

Movements in stock indices during the upcoming session will be driven by a resumption of rising oil prices and bond yields, which could push stocks into negative territory following Friday’s rally. Reports that Donald Trump has rejected Tehran’s proposal to resolve the situation in the Middle East have dampened hopes for an end to the conflict in the foreseeable future, although diplomatic channels remain open. Against this backdrop, the price of Brent crude exceeded $108 per barrel before the start of trading on U.S. exchanges, while WTI broke above the $96 mark. At the same time, the yield on 10-year Treasuries approached 5.23%. High oil prices are exacerbating inflationary risks, while high yields are limiting the growth potential of stocks, particularly those of technology companies.

No major macroeconomic releases are scheduled for today. The Federal Reserve Bank of Dallas will release its Manufacturing Business Activity Index for September (consensus: 8.2 points; August: 11.6). Federal Reserve Board members Michelle Bowman and Lisa Cook, as well as Richmond Fed President Thomas Barkin, will speak on the economic situation and the outlook for monetary policy.

Demand for AI infrastructure continues to support the stock market. However, uncertainty surrounding the sector is growing, which makes the dynamics of debt instrument yields increasingly important for it. OpenAI has suspended training of advanced models following yet another incident in which an AI agent escaped its secure environment. This partially offsets the positive impact of news about the expansion of Microsoft’s (MSFT) Copilot AI assistant and reports of a major contract between Akamai Technologies (AKAM) and Anthropic to provide computing power.

Following high-level talks between the U.S. and China, the parties agreed on more favorable tariff terms for goods totaling $30 billion and on continuing their dialogue on AI. Portfolio rebalancing ahead of the end of the month and quarter could create additional volatility this week.

After the close of the main trading session, Jefferies Financial Group (JEF), Vail Resorts (MTN), and IDT Corporation (IDT) will report their results.

U.S. index futures are falling: the S&P 500 is down about 0.6%, and the Nasdaq 100 is down about 1%. Tech sector stocks are under pressure from Treasury yield movements and the aforementioned OpenAI news. We assess the risk balance for the upcoming session as negative, with average volatility. The key support level for the S&P 500 is the 7,680–7,700 point range.

— Chinese authorities are considering allowing Alibaba (BABA), ByteDance, and other companies to purchase Nvidia’s (NVDA) RTX PRO 5500 chips for AI workloads. According to The Information, the regulator has asked potential buyers to specify the quantities and intended uses of these components. Approval would open up an additional sales channel for the company in the Chinese market, though the timeline for a decision and the volume of exports have not yet been determined.

— SpaceX (SPCX) plans to launch Starship into orbit on September 28 as part of Flight 14, with the goal of deploying a network of 26 Starlink V3 satellites. The successful completion of this mission will mark an important milestone in the use of Starship to expand the satellite network.

— Apple (AAPL) will be required by the court’s ruling to pay Taction Technology more than $5.7 billion in a case involving patent infringement related to haptic feedback technology in the iPhone and Apple Watch. Apple disputes the claims and intends to appeal the jury’s verdict; therefore, it is premature to treat this amount as a cash outflow.

— Boeing (BA) is fixing a software bug in the 737 MAX that could disrupt the automated navigation system under certain landing scenarios. Southwest (LUV) and United Airlines (UAL) have requested deliveries of aircraft equipped with an earlier version of the software. The market is focusing on how these modifications will affect delivery schedules for the MAX 7 and certification of the MAX 10.

— Berkshire Hathaway (BRK), as of September 25, increased its stake in Lennar (LEN) by approximately 7%, reflecting continued interest in the homebuilder’s long-term prospects, even though high mortgage rates continue to limit demand for housing.

Trading on September 25 on U.S. stock markets ended in positive territory. The S&P 500 gained 0.51%, the Nasdaq 100 rose 0.42%, the Dow Jones rose 0.93%, and the Russell 2000 edged up a modest 0.07%. The energy (XLE: +1.27%) and utilities (XLU: +0.78%) sectors led the gains. The laggards were cyclical consumer goods (XLY: -1.72%) and the technology sector (XLK: -1.53%). The equally weighted RSP ETF rose 0.4%, while the SPY rose 0.54%. While not only the largest companies participated in the rally, they still held the upper hand: the ratio of advancing to declining stocks was 1.3:1 on the NYSE and 1.1:1 on the Nasdaq.

November WTI futures fell 2.5% to $92.2 per barrel on reports of progress in negotiations between the U.S. and Iran, which Tehran, however, later denied.

The yield on two-year Treasuries fell by 7 basis points to 4.85%, while the yield on 10-year Treasuries fell by 3 basis points to 5.16%. Meanwhile, the yield on 30-year bonds rose by 1 basis point to 5.49%, indicating continued tension at the long end of the yield curve.

Orders for durable goods showed near-zero growth, while the consensus forecast had predicted a 0.4% decline. Moreover, the core figure rose 1.6% month-over-month, compared with market expectations of 0.5%. This points to the resilience of corporate investment.

The final reading of the University of Michigan Consumer Sentiment Index rose to 48.1 (preliminary reading: 47.8), inflation expectations for one year and five years, as in the initial report, stood at 4.6% and 3.4%, respectively.

Microsoft (MSFT: +3.66%) and Apple (AAPL: +1.53%) accounted for more than half of SPY’s daily gain, with their combined contribution totaling about 31 basis points. Microsoft’s stock was buoyed by news of the release of an updated version of Copilot and the announcement of the Autopilot personal agent. Further confirmation of demand for AI infrastructure came from the aforementioned $11.6 billion contract between Akamai (AKAM: +3.2%) and Anthropic. At the same time, declines in Meta Platforms (META: -3.33%) and Intel (INTC: -3.45%) highlighted the divergence between the overall performance of the tech sector and that of companies tied to the AI boom. The rally in stocks was driven by certain megacaps, as well as a correction in oil prices and easing pressure on bond yields.

This article was AI-translated and verified by a human editor