Good morning,
 
Despite rallying on Friday, equity markets ended last week lower heading into this week’s FOMC rate decision and triple witch expiration. Oil prices were up ~10% for the second consecutive week as the US and Iran continued to exchange fire, the situation in the Red Sea deteriorated and Saudi Arabia shut down its East-West pipeline. Oil prices did pull back from the highs on Friday after reports that that members of the Gulf Cooperation Council would meet with Iranian officials in Oman today. The week’s inflation data was largely inline with expectations but the fact that there wasn’t meaningful progress coupled with the rise in oil prices sent Treasury yields sharply higher, with markets now expecting a hike on Wednesday. The S&P 500 closed the week down 0.8% after testing its 50d ma and the lower end of the recent range ~7,600. The AI factor helped the index outperform while there was broad based weakness under the surface with the equal-weight and small/mid cap indices ending the week down ~2%.
 
The biggest news coming out of the weekend was that the Jets and Giants both won their opening game of the season for the first time since 2009. That has put me in a better mood writing this morning’s note but unfortunately that is where the positivity gets short circuited. Futures are under pressure this morning with oil prices back on the move higher again as today’s meeting in Oman was postponed, Houthis continue to capture territory on the coast of Yemen, and the East-West pipeline remains shut. However,  unlike last week tech is not the stabilizing force but rather the source of much of the weakness. Over the weekend Anthropic’s CEO published an essay calling for the slowdown of AI model development to better understand security risks involved, which has received support from other AI leaders. Companies levered to the AI capex boom: chips, memory, neoclouds and industrials are down >5%. The software sector is catching a bid (IGV +2%) while hyperscalers are outperforming. S&P futures are down ~0.75% which if we open at these levels would put the S&P 500 ~7,600 again. Dow and R2k futures are down ~0.5%.
 

 
There is no US economic data on the calendar today. Treasury yields are modestly higher. The 2yr is up 2bps hitting a new YTD high while the 10yr is sitting just under the closely watched 5% level. The USD index is up ~0.5%, breaking back above its 200d ma (~$99).
 

• US 2yr +1bps to 4.64%, 5yr +1bps to 4.80%, 10yr +0bps to 4.98%, 30yr -0bps to 5.35%
• USD index: +$0.50 to $99.35

 
Global markets were mostly lower overnight with tech heavy indices underperforming. South Korea fell >3%. The Nikkei was down just under 1% with financials, software and retail offsetting tech weakness. Softbank was down ~10% after Open AI confirmed it would not IPO this year.  European indices are modestly lower. The FTSE 100 is bucking the weakness with strength in healthcare, staples and energy.
 

 
The energy complex is moving higher. ICE Brent is up >4% approaching $110 again. President Trump has called on Ukraine to stop hitting Russian refineries as diesel prices top $6/gallon in the US. Nat gas prices are also rallying up ~2% in the US and >5% in Europe. The USD strength is weighing on the metals complex. Gold is down ~2% trading just under the September lows but holding just above its 50d ma (~4,300). Ag is modestly higher. Crypto bounced modestly overnight on reports that the administration had agreed to some ethics provisions ahead of a key vote tomorrow. On Polymarket odds that the Clarity Act would be signed into law by the end of 2026 have jumped to ~30% from the high teens late last week.
 

 
Economic Data:
US:

• 11:30 3/6mo Tbill auction

Global:

• China loan growth: 4.9% vs. 5.1% cons., prior 5.1%
• India inflation: 4.82% y.y vs. 4.8% cons., prior 4.44%
• Canada CPI/core: -0.1%/0.1% vs. 0%/0.2% cons., prior 0.5%/0.2%