Good morning,
 
It is the first official day of fall, confirmed by the weather outside.  Yesterday was a reasonably quiet session with major indices closing on either side of unchanged consolidating the gains of Monday’s Meta Muse motivated rally, that’s a lot of M’s. AI chips/memory/hardware continued to outperform while the AI disruption trade took a new twist with fears that AI agents could disrupt wealth management, traditional brokerage businesses, payments processors and online travel companies. The financial sector was the worst performing within the S&P 500 falling 2% while energy and communication services were both down 1%. Materials and consumer staples were both up >1%. President Trump gave a wide-ranging speech at the UNGA. Late in the session he acknowledged hat US officials met with an Iranian delegation suggesting that it went well. Oil prices fell for the fifth consecutive session with ICE Brent breaking below $100.
It’s been a very quiet overnight session as markets await the arrival of President Xi in Washington this afternoon and Mark Zuckerberg’s keynote at Meta’s Connect conference after the close. However, there is some buzz on the floor as the First Lady will be ringing the opening bell. Oil prices and yields were modestly lower overnight putting a bid in equity futures. Oil/yields started to reverse around 6:30 this morning and equity futures have followed suit turning slightly lower. Quantum stocks are in focus this morning after IonQ (+>10%) demonstrated the first end-to-end real-time quantum error correction decoder. Worthington Enterprises and Cracker Barrell are both trading higher after earnings while Paychex is under pressure after its results.
 

 
Mortgage applications fell 1.5% w.w as mortgage rates crossed over 7%. After the open S&P Global Flash PMIs will be released. There are a couple of Fed speakers throughout the day (Barr, Goolsbee). At 11:00 the Treasury will announce the size of tomorrow’s liquidity support buyback, which disappointed markets a couple of weeks ago. There is also a 2yr floating rate auction at 11:30 and $70B 5yr auction at 1:00. Treasury yields are up 1-2bps across the curve with the 2yr ticking to a new YTD high at 4.79%. The move higher seems to be in response to yields in Europe which started to move higher after the release of flash PMIs this morning. 2yr yields in Germany and France are both up ~6bps while yields in Italy are blowing out up 10-15bps across the curve. The USD index is extending recent gains up ~0.35% starting to separate from the $100 level.
 

• US 2yr +1bps to 4.80%, 5yr +2bps to 4.87%, 10yr +2bps to 4.99%, 30yr +2bps to 5.32%
• USD index: +$0.33 to $100.65

 
Global markets were mixed overnight. Japan remained closed for holiday. China/Hong Kong closed modestly lower ahead of today’s summit with tech stocks under pressure. South Korea was up ~1%.  Indonesia kept rates on hold as expected. European Manufacturing flash PMIs were inline overall and largely unchanged from last month while remaining in the expansion zone (>50). Services were better than expected with France and Germany jumping into expansion from contraction last month. European indices opened modestly higher but have been drifting lower throughout the session as yields have moved higher.
 
 

 
Oil prices have reversed overnight losses with ICE Brent up ~1% trading just over $100. Oil inventories are out after the open. US natural gas prices are extending yesterday’s move higher breaking above $3 while prices in Europe are a touch lower. The USD strength and increasing rate hike expectations is weighing on the metals complex. Ag is modestly lower. Crypto moved higher during Asian market hours but is now modestly lower but holding on to the bulk of Monday’s gains.
 

 
Earnings:
After-Market (Tues): KBH, WOR
Pre-Market: CBRL, CTAS, GIS, MANU, PAYX 
After-Market: FUL, SFIX
 
Economic Data:
US:

• Mortgage applications: -0.8% vs prior -0.8%
  • Refis: -2.6% vs prior -8.8%
  • 30yr rate: 7.12% vs prior 6.97%
• 9:45am Flash PMIs
• 10:45am Fed Barr speech
• 10:30am EIA crude inventories
• 11:30am 2y auction
• 1:00pm 5y bond auction

Global:

• Manufacturing / Services Flash PMIs:
  • India: 55.7 / 55.8 vs prior 52.8 / 54.1
  • Australia: 49.3 / 51.4 vs prior 52.0 / 53.2
  • EU: 52.7 / 53.0 vs 52.6 / 51.5 cons, prior 52.7 / 51.6
  • UK: 52.0 / 51.7 vs 51.5 / 52.0 cons, prior 51.7 / 52.5
  • Germany: 53.8 / 52.9 vs 54.0 / 50.0 cons, prior 54.3 / 49.7
  • France: 50.3 / 51.4 vs 50.9 / 48.3 cons, prior 51.1 / 48.0
• Indonesia rate decision: Unchanged as expected
• Taiwan Industrial Production y.y: 23.47% vs prior 23.95%