Futures Fall as 30-Year Yield Hits 2002 High; Constellation Brands Slides

Good morning. This is Trade and Ticker. Wednesday, October seventh, twenty twenty-six. We're lining up the open: what futures are saying and what to watch when the bell rings.

Daily Catalysts. Four things to watch today. First, Treasury yields, with the thirty-year back at its highest level since two thousand two and a ten-year note auction at one o'clock Eastern. Second, the minutes from the Fed's September meeting, out at two o'clock Eastern, plus a handful of Fed speakers. Third, oil, with Brent crude back above one hundred dollars on Middle East attacks and a storm brewing in the Gulf of Mexico. Fourth, earnings: Constellation Brands is sliding this morning after last night's report, and Applied Digital and Levi Strauss report after the close. We'll get into each of these as we go.

Let's start with U.S. futures. The board is pointing lower this morning, a day after the S-and-P and the Nasdaq both closed at records. As of about eight o'clock Eastern, Dow futures are down about seven-tenths of a percent, or roughly three hundred fifty points. S-and-P futures are down about four-tenths of a percent. Nasdaq futures are down about seven-tenths of a percent. The losses have grown since early in the overnight session, and tech and the Dow are leading the way down.

That comes after a strong Tuesday. The S-and-P finished about six-tenths of a percent higher at its first record close since August. The Nasdaq finished about half a percent higher, also at a record. The Dow gained about half a percent, but it is still roughly five percent below its own record from early August. And the rally has been narrow underneath. The equal-weighted S-and-P, where every company counts the same, is still more than five percent below its high, and the small-company Russell two thousand is down more than eight percent from its record.

Now rates and oil, because that is today's story. Yields are climbing again. The ten-year Treasury yield is up to about five-point-three-three percent, from about five-point-two-seven at Tuesday's close. The thirty-year yield is around five-point-seven-one percent, the highest since two thousand two. When long-term borrowing costs rise like that, it puts pressure on stock valuations, especially for the big growth names that have led this rally. On the Fed, traders see roughly a four-in-five chance the central bank holds rates steady at its meeting later this month, but another hike by December is still very much in play.

Oil is rising. Brent crude is up about seven-tenths of a percent to roughly one hundred one dollars a barrel. U.S. crude is up about four-tenths of a percent to just under ninety dollars. Two things are behind it. Yemen's Houthi rebels have stepped up attacks on Saudi Arabia, including strikes aimed at two Saudi airports. And a storm in the Gulf of Mexico, which forecasters say could become Hurricane Isaias, has already shut in a little more than nine percent of Gulf oil production as of Tuesday, according to the federal agency that oversees offshore drilling.

In early trading, chip stocks are leading the decline. Micron is down about two and a half percent. A-M-D, Broadcom, and Marvell are down between one and two percent, after big gains on Tuesday. Among the megacaps, Nvidia is down about one percent, and Amazon is down about one percent as well. Microsoft, Alphabet, Tesla, and Meta are modestly lower. Apple is a rare gainer, up nearly one percent. Constellation Energy, which jumped about twelve percent on Tuesday after its nuclear power deal with Google, is giving back about three percent. And SpaceX is down about two percent after a Financial Times report that it is seeking about forty billion dollars in financing to buy Nvidia chips.

On the upside, a few earnings stories. Neogen, the food safety company, is up more than ten percent after raising its full-year revenue outlook. Penguin Solutions, which builds A-I data center systems, is up about five percent after a quarterly beat. Flutter Entertainment, the parent of FanDuel, is up about three percent after Citi upgraded the stock to buy. And the shipping company ZIM is up more than three percent after sharply raising its profit outlook for the year.

Quickly overseas. Tokyo fell nearly one percent, though the Nikkei held just above seventy thousand. Hong Kong slipped about six-tenths of a percent. Europe is down about one percent.

Now let's get into those four things to watch.

First, yields and the auction. The Treasury sells thirty-nine billion dollars of ten-year notes at one o'clock Eastern. With long-term yields at their highest in more than two decades, this is a real test of demand. A weak auction, where buyers ask for a higher yield than expected, could push rates up further into the afternoon. A strong one could give stocks some relief. With the thirty-year above five-point-seven percent, this is the number the whole market will be watching right before the Fed minutes.

Second, the Fed. At two o'clock Eastern, the Fed releases the minutes from its September meeting, when it raised interest rates for the first time since twenty twenty-three. Investors want to know how many officials backed that hike, and whether they saw it as a one-time move or the start of a longer run of increases. Fed Governor Christopher Waller and regional Fed presidents Alberto Musalem and Neel Kashkari are also scheduled to speak today. Any of them leaning toward more hikes could add to the pressure on bonds. The Fed's next decision comes October twenty-eighth.

Third, oil. Brent above one hundred dollars and a ten-year yield above five-point-three percent is an uncomfortable combination for stocks, because higher energy costs keep inflation sticky just when investors are hoping the Fed can pause. Watch the storm track in the Gulf through the day. Forecasters say it could strengthen into a hurricane later this week, and more production could be shut in if it heads toward the northern Gulf Coast.

Fourth, earnings. Constellation Brands, the company behind Corona and Modelo, is down about five percent in early trading. The quarter itself beat expectations. Sales rose about six percent to two-point-six-three billion dollars, and adjusted earnings came in at three dollars and seventy-four cents a share. But it only held its full-year profit outlook rather than raising it. The bigger worry is demand. Beer depletions, which track what distributors actually sell to stores and bars, fell about six-tenths of a percent, with Modelo and Corona both lower. Then after the close, Applied Digital, which builds data centers for A-I, reports quarterly results. That is another test of whether investors will keep paying up for the data center buildout. And Levi Strauss reports as well, a read on how shoppers are holding up.

Here's what would make a lower open worse. Watch three things. First, the thirty-year yield pushing well past five-point-seven percent, especially after a weak auction. Second, Fed minutes that point to more hikes ahead. Third, oil climbing further on new Middle East attacks or storm damage in the Gulf. On the other side, a solid auction and calm minutes could bring buyers back to a market that was sitting at records just yesterday.

So here's the picture heading into the open. Futures are lower, with tech and the Dow leading the way down. The ten-year yield is up to about five-point-three-three percent, the thirty-year is at its highest since two thousand two, and Brent crude is back above one hundred dollars. Chip stocks are giving back Tuesday's gains, and Constellation Brands is sliding on weak beer demand. The ten-year auction at one and the Fed minutes at two are the big tests of the day.

We'll be back at midday with the lunch show: how stocks are handling the jump in yields, a preview of the auction and the Fed minutes, and what to expect from Applied Digital and Levi Strauss after the close. Thanks for listening. I'm Trade and Ticker.