Good morning and Happy October Yankee fans,
 
We flip the calendar and hit the home stretch for 2026. We also say goodbye to Artificial Intelligence and Hello to Super Intelligence, codified in an executive order. The S&P 500 ended September down 0.5%, but that papers over the 5% decline in the equal-weight. Small caps were down similarly. Equities had to navigate the surge yields as rates climbed 40-50bp across the curve, along with sharply higher crude prices. Mega caps and semis kept the market cap weighted index afloat. For Q3 the S&P rose 2.0% while the equal-weight and Russell fell ~2%. Energy led in Q3 while the rate-sensitive Utilities- which are increasingly dragged into AI/SI build-out tensions, lagged, along with Industrials. Yesterday the S&P fell 0.3% on the last day of the month/quarter, while the equal-weight dropped 0.7% and Russell 200 0.4%. Equites were holding up but sold off into the close as the month/quarter came to a close and rebalancing flows likely kicked in. Yields continued to climb as did oil. PCE was the big data update and came in cooler than expected. 2y yields dropped initially but recovered the entire move by day’s end, while the long-end continued to climb.  

The Yankees went Bachman Turner Overdrive last night, Taking Care of Business against the Red Sox and moving on to face the Rays. To celebrate, S&P futures are trading higher. They moved well off their best levels in the early morning but have recovered most of that drop. MU reported last night and reported strong results as expected though the stock is trading down 1% in the pre-market. The company sees memory supply constrained through 2028 and commentary couldn’t be any more optimistic- “Micron delivered record fiscal 2026 results, and we expect an even stronger fiscal 2027.” GOOG is up ~2% after launching its latest Gemini model, Argon. ORCL is up modestly as well, following news that Tencent will lease 100K AI chips from the company’s Asian data centers. NKE repots after the close.  ACN is sharply higher after results helped cool the AI/SI displacement narrative.
 
 

 
There’s more curve steepening this morning as the 2y sinks 2bp while 10/30y rise 2-4bp. Weekly claims were as expected. The US Dollar Index is up and has reached a YTD high, briefly hitting 101.75. The yen was weaker after the BOJ’s Summary of Opinions didn’t advance the case for another rate hike in October, though it did note policy has finally shifted, after 13 years, from generating price growth to preventing an inflation overshoot. ISM Manufacturing comes out after the Open. 

• US 2yr -2bps to 4.87%, 5yr -1bps to 5.08%, 10yr +2bps to 5.31%, 30yr +4bps to 5.67%
• USD index: +$0.36 to $101.56

Global tech stocks saw sharp gains following Micron’s earnings. Japan ripped to start October as the Nikkei rose over 3% with the big tech names leading: Kioxia +6%, Advantest +10%, Tokyo Electron +6%. Electric motors maker Nidec continued to be under pressure, falling over 10% as the company weathers accounting issues. China was closed for a holiday. Korean exports rose sharply as exports continue to surge. After earlier reports saying SK Hynix was looking to list its solid-state drives (SSD) unit Solidigm, the company said it has yet to make a decision. Yesterday Commerce Secretary Lutnick announced a ~$50B investment by the South Korean government into an LNG pipeline in Alaska. However overnight, South Korean officials said the comments went “far beyond what was agreed to.” Australia was a notable laggard in the region. European equities were under pressure with major indicies down 1% or more, however they have mostly bounced from those lows- Germany’s DAX tagged its 200d ma and rallied off it. France and the UK are lagging.  Financials are the main underperformers, with multiple large banks down 2%. Consumer goods also lagging. In the UK, new PM Burnham discussed closer ties with the EU, including the possibility of returning to the bloc, though it’s not something that would happen anytime soon.
 

 
Crude is higher with Brent Dec contract back above $100. Metals are mixed with Gold and silver up ~1-2%, with gold looking to put in a low ~$4150. Copper is modestly lower. Ag is mixed as is crypto, with Bitcoin flat to slightly lower.
 

 
Earnings
After-Market: BSET, MU, PRGS
Pre-Market: ACN, AYI, MKC
After-Market: NKE
 
Economic Data:
US:

• Jobless claims: 197K vs 200K cons, prior 198K
  • Continuing Claims: 1701K vs 1730K cons, prior 1712K
• 9:45am final Manufacturing PMI
• 10:00am ISM Manufacturing
• 10:00am Construction Spending
• 4:30pm Fed Balance Sheet
• Fed Speakers: Barkin, Collins, Schmid, Williams, Logan (AMC)

Global:

• Final Manufacturing PMIs
• Japan Tankan large manufacturers survey: 24 vs 25 cons, prior 22
• Japan final Manufacturing PMI: 54.1 vs flash 54.1
• Japan Tankan 1 / 5y inflation expectations: 2.6% / 2.5% vs prior 2.7% / 2.6%
• Korea Exports y.y: 83.5% vs 61.7% cons, prior 68.7%
• UK Home prices y.y: 0.8% vs 1.3% cons, prior 1.6%
• EU Unemployment: 6.4% vs 6.4% cons, prior 6.4%