US Stock Outlook | Futures of the three major stock indexes fell sharply, and oil broke through $100, and 30-year US Treasury yields climbed to a high point since 2002

Pre-market market trends

1. On October 7 (Wednesday), the futures of the three major US stock indexes fell sharply before the US stock market. As of press release, Dow futures were down 0.69%, S&P 500 futures were down 0.35%, and NASDAQ futures were down 0.66%.

2. As of press release, the German DAX index fell 1.28%, the UK FTSE 100 index fell 0.75%, the French CAC40 index fell 1.18%, and the European Stoxx 50 index fell 1.79%.

3. As of press release, WTI crude oil rose 0.41% to $89.81 per barrel. Brent crude rose 0.66% to $101.24 per barrel.

Market news

The Houthis attack and the storm in the US Gulf of Mexico have increased supply risks, and oil prices have risen. Oil prices rose on Wednesday due to a multi-factor game. On the one hand, traders want to evaluate the new round of attacks by the Houthis against Saudi Arabia and the suspension of oil and gas production due to the storm in the US Gulf of Mexico; on the other hand, they also see that crude oil supply to the Middle East is recovering. The Saudi General Authority of Civil Aviation said on Tuesday that Jizan's King Abdullah International Airport and Najran International Airport were damaged in an attack. Three people were injured as a result of the attack. Outside the Middle East, an ongoing storm has also shut down some US crude oil production in the Gulf of Mexico. The US Ocean Energy Administration said that as of Tuesday morning, due to the impact of the company's storm preparedness, the daily production of offshore crude oil had to be shut down, accounting for 9.2% of the total production in the Gulf of Mexico; no production platforms or drilling platform operators had been evacuated until now.

The outlook for the Federal Reserve's interest rate hike is still variable: Daly is concerned about the continuation of the impact of inflation, and Bauman pushes ahead with bank regulatory reforms. Within the Federal Reserve, important adjustments in monetary policy and banking supervision are being promoted at the same time. San Francisco Federal Reserve Chairman Daly said that she supports the Fed's interest rate hike in September to deal with rising inflation risks, but whether further interest rate hikes are needed in the future will largely depend on whether the inflationary impact caused by tariffs, energy prices, and AI investment is only temporary or will continue or even superimpose on each other. Meanwhile, Bauman, the Federal Reserve's vice chairman in charge of regulatory affairs, announced that it will restructure the US banking supervision system and consider adjusting the bank asset size threshold that triggers stricter capital, liquidity, and stress testing requirements.

The 10-year US bond auction and FOMC meeting minutes are about to be announced, and US bond yields are rising. Investors will have two key events on Wednesday. The minutes of the FOMC meeting will be published at 2 p.m. ET, and the market will carefully explore the Federal Reserve's monetary policy decisions. At the Federal Reserve's September interest rate meeting, policymakers voted to raise interest rates for the first time since 2023. Over the past six weeks, due to concerns about inflation and rising energy prices, bonds have been sold off, and US bond yields have continued to rise. According to CME Federal Reserve Watch Tool data, traders are currently setting prices, and the probability that the Federal Reserve will keep interest rates unchanged at the next meeting is 78%. The US Treasury Department plans to auction $39 billion of 10-year Treasury bonds on Wednesday. Amid multiple concerns about inflation, debt size, and maturity risk, this auction will test whether the current level of yield is sufficient to attract buyers, or whether investors will demand a higher risk premium.

The 30-year US Treasury yield climbed to its highest level since 2002. As oil prices continued to rise, US Treasury bonds continued their decline on Wednesday, and yields returned to the high they hit earlier this week. The 30-year US Treasury yield rose 5 basis points to 5.7%, and the 10-year yield rose 4 basis points to 5.3%. Traders have further increased their short bets on US Treasury bonds, indicating that there may still be room for continuation in this round of sell-off that has driven long-term US bond yields to a nearly 24-year high.

Shell CEO Savan: Middle East oil flows have returned to about 80% before the war. Shell (SHEL.US) CEO Savan said on Tuesday that Middle East oil flows have recovered to about 80% of pre-war levels, which confirms the resilience of countries in the region in maintaining supply commitments to the global market. Although many banks and shipping analysts also believe that oil flows in the Middle East are approaching pre-conflict levels, Savan's latest statement provides one of the most authoritative assessments to date for the outside world to judge the progress of the region's export recovery. According to data from the ship tracking agency Kpler (Kpler), Saudi Arabia, the United Arab Emirates, Iraq, Oman, Qatar, Kuwait, and Iran exported nearly 16.33 million barrels of oil per day in September, a decrease of about 3.2 million barrels from about 19.51 million barrels before the outbreak of the conflict in February this year, returning to about 80% of pre-war levels. Middle Eastern oil producers are expected to leave the Strait of Hormuz for nearly 9.72 million barrels of crude oil per day, and this data does not include vessels that have turned off automatic identification systems to evade detection.

Komo: America's deep non-performing loans have risen to a new high since the pandemic, and the technology industry has become the hardest hit area. A J.P. Morgan strategist wrote on Tuesday that the deep plight of the leveraged loan market has risen to the highest level since the beginning of the pandemic, and technology is the single industry under the greatest pressure. Specifically, the size of loans with transaction prices below 60% of face value (that is, the level of deep distress) rose from 40 billion US dollars a year ago to 65 billion US dollars, the highest since March 2020. Non-performing leveraged loans (that is, loans with a transaction price of 80% or less of face value) are also increasing, totaling US$139.8 billion, surging nearly 90% over the past 12 months, only US$4 billion below the May 2020 high.

Individual stock news

Shell (SHEL.US) predicts strong oil trading performance in the third quarter: refining profit margins soared to a new record of 42 US dollars per barrel. Shell expects the oil trading business to deliver strong results in the third quarter as tighter global fuel supplies drive refining margins to record highs. The energy giant said the oil deal was in line with strong results from the previous three months, thanks to a refining margin of $42 per barrel, which far surpassed the highest level of the quarter prior to 2022. Due to the tightening of the global market due to the war in Iran and attacks on Russian refineries, Shell and its peers have been increasing refinery production capacity as much as possible, only stopping production for maintenance when absolutely necessary. Shell refiners' operating volume was only slightly lower than in the previous quarter, when their production capacity was already at full capacity. Shell's operating rate this quarter was only slightly lower than the previous quarter, when the refinery was in full operation.

Uber (UBER.US) plans to use $2.3 billion in cash to acquire EzCater to expand corporate catering services. Uber will buy foodservice company EzCater Inc., for $2.3 billion in cash. This move will help the Uber Eats delivery platform reach more corporate customers. ezCater provides a food service platform through which companies can arrange catering services for events, meetings, and other gatherings. Uber said in a statement on Tuesday that the private company's total bookings over the past 12 months have exceeded 2.5 billion US dollars and cooperated with more than 140,000 restaurants across the US. The average EzCater customer spends over $400 per order. The acquisition will help Uber better compete with DoorDash (DASH.US), the leading food delivery platform in the US. DoorDash launched a food service product for corporate employees in April of this year.

Rumor has it that Apple (AAPL.US) and LG are entering smart homes: accessories such as doorbells, thermostats, and cameras will be branded as LG. According to people familiar with the matter, Apple (AAPL.US) is about to expand the layout of smart home devices, including doorbells, thermostats and other accessories, and these products will be developed by Apple and LG Electronics through an unusual cooperative approach. Related products will incorporate a device ecosystem that can work in collaboration with Apple's new smart home hub, while also being compatible with the upgraded HomePod mini and new TV set-top boxes. The new Apple-owned device mentioned above is scheduled to be released on October 13. According to people familiar with the matter, the products developed by Apple in collaboration with South Korea's LG also include smart anti-theft locks, indoor security cameras, outdoor security cameras, and floodlight cameras. Although both parties participate in the development, the product will use the LG brand, and LG is responsible for manufacturing and product support.

Hollywood giant Skydance (SKYD.US) is officially born. On Tuesday local time, Paramount Sky Dance completed a huge $110 billion acquisition of Warner Bros. Discovery (WBD). After the merger, the new company was officially named “Skydance” (Skydance), which also meant that a new Hollywood giant was born. The deal integrates film studios such as “Mission Impossible,” “Harry Potter,” and DC Pictures, as well as large TV and streaming networks such as CBS, CNN, Paramount+, and HBO Max to create a comprehensive entertainment company spanning the film, television, and news businesses. Shares of the merged company were traded on Tuesday from NASDAQ to the New York Stock Exchange under the stock code “SKYD.”

Microsoft (MSFT.US) is expected to release a new Surface for AI developers without cloud computing power. Microsoft will host a special event in San Francisco on October 7 to keep quiet about the conference topics. Microsoft confirmed that the agenda includes content related to Windows, RTX Spark, and Surface, but no specific details have been announced yet. Following the 2024 Copilot+ PC press conference, this is Microsoft's first press conference dedicated to Windows and Surface. Unsurprisingly, one of the highlights of the October 7 press conference will be Microsoft's new hardware device equipped with RTX Spark. The Surface Laptop Ultra was unveiled in June of this year. It is expected that more hardware details, performance capabilities, and availability information on this device will be announced on site in San Francisco.