US Stock Market Preview | All Three Major Index Futures Fall, Brent Crude Surpasses $100 Again, 30-Year Treasury Yield Rises to Highest Level Since 2002

Pre-market Market Movements

1. Ahead of the US market open on Wednesday, October 7th, all three major US stock index futures fell. As of press time, 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 time, the German DAX index was down 1.28%, the UK FTSE 100 was down 0.75%, the French CAC40 was down 1.18%, and the Euro Stoxx 50 was down 1.79%.

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

Market News

Houthi attacks and escalating US Gulf storms increase supply risks, pushing oil prices higher. On Wednesday, oil prices rose amid numerous factors. Traders are assessing the latest round of Houthi attacks on Saudi Arabia, US oil and gas production cuts in the Gulf of Mexico due to storms, while noting that Middle Eastern crude supplies are recovering. On Tuesday, Saudi Arabia’s General Authority of Civil Aviation announced that Jizan's King Abdullah International Airport and Najran International Airport were damaged in attacks, injuring three people. Outside the Middle East, a developing storm also forced some US Gulf oil output to halt. The US Bureau of Ocean Energy Management reported that by Tuesday morning, as companies took precautions, daily offshore oil output decreased by 185,120 barrels, accounting for 9.2% of total Gulf production; at that time, no staff evacuation had yet taken place on any production or drilling platforms.

Uncertainty remains about further Fed rate hikes: Daly focuses on inflation shock persistence, Bowman advances banking regulatory reform. The Federal Reserve is pushing forward with major adjustments in both monetary policy and banking regulation. San Francisco Fed President Daly said on Tuesday she supports the Fed’s September rate hike to address rising inflation risks, but whether more hikes are needed will depend on whether inflation shocks from tariffs, energy prices, and AI investment are temporary or persistent and possibly compounding. Meanwhile, Fed Vice Chairman for Supervision Bowman announced a restructuring of the US bank regulatory system and is considering adjustments to the thresholds of bank asset sizes that trigger stricter requirements for capital, liquidity, and stress testing.

10-year Treasury auction and FOMC minutes release imminent, US Treasury yields climb higher. Investors are bracing for two key events on Wednesday. At 2 p.m. Eastern Time, the FOMC meeting minutes will be released, with the market looking for clues regarding future Federal Reserve policy decisions. In the September FOMC meeting, policymakers voted for a rate hike, the first in 2023. In the past six weeks, concerns over inflation and rising energy prices have triggered bond sell-offs and pushed Treasury yields higher. According to the CME FedWatch tool, traders now price a 78% probability of the Fed holding rates steady at its next meeting. The US Treasury will auction $39 billion in 10-year bonds on Wednesday. Amidst worries about inflation, debt size, and duration risk, the auction will test whether current yield levels can attract buyers—or whether investors will demand a higher risk premium.

30-year US Treasury yield rises to highest since 2002. As oil prices continue climbing, US Treasuries extended losses on Wednesday and yields returned to highs seen earlier this week. The 30-year Treasury yield rose 5 basis points to 5.7%, while the 10-year yield climbed 4 basis points to 5.3%. Traders further increased their short positions on US Treasuries, suggesting that the sell-off driving long-term yields to multi-decade highs could continue.

Shell CEO Sawan: Middle Eastern oil flows recover to about 80% of pre-war levels. On Tuesday, Shell (SHEL.US) CEO Sawan stated that Middle Eastern oil flows have rebounded to about 80% of pre-war levels, demonstrating the region’s resilience in upholding global supply commitments. While multiple banks and shipping analytics agencies also believe Middle Eastern oil flows are nearing pre-conflict levels, Sawan’s latest comments provide one of the most authoritative assessments so far. According to vessel-tracking agency Kpler, in September, Saudi Arabia, the UAE, Iraq, Oman, Qatar, Kuwait, and Iran exported nearly 16.33 million barrels per day on average, about 3.2 million barrels less than the roughly 19.51 million barrels per day before the conflict broke out in February, returning to approximately 80% of pre-war levels. Middle Eastern oil exported through the Strait of Hormuz is estimated at nearly 9.72 million barrels per day, not including ships that disabled automatic identification systems to avoid detection.

JPMorgan: US deeply troubled loans hit highs since pandemic, tech industry most affected. JPMorgan strategists wrote Tuesday that the scale of deeply distressed leveraged loans has risen to the highest since the start of the pandemic, with technology facing the most pressure. Specifically, the scale of loans trading below 60 cents on the dollar (deep distress) rose from $40 billion a year ago to $65 billion, the highest since March 2020. Nonperforming leveraged loans (those trading at or below 80 cents) are also rising, now totaling $139.8 billion—up nearly 90% year over year, and just $4 billion shy of the May 2020 peak.

Individual Stock News

Shell (SHEL.US) forecasts strong Q3 oil trading results: refining margins soar to record $42/barrel. Shell expects to deliver strong Q3 results from its oil trading business as tight global fuel supplies push refining margins to new records. The energy giant said oil trading performance was in line with the strong previous quarter, driven by a $42 per barrel refining margin, far exceeding the highest levels seen before 2022. Due to the Iran war and refinery attacks in Russia tightening global supplies, Shell and its peers have been maximizing refinery output and only shutting down for essential maintenance. Shell's refinery operating rates this quarter are only slightly below the previous quarter, when capacity was at full throttle.

Uber (UBER.US) to acquire ezCater for $2.3 billion in cash, expanding corporate catering offerings. Uber will acquire catering service company ezCater Inc. for $2.3 billion in cash, helping the Uber Eats platform reach more business customers. ezCater provides a platform for organizations to order catering for events, meetings, and gatherings. Uber said Tuesday that the private company’s total booking volume over the past 12 months exceeded $2.5 billion with partnerships with more than 140,000 restaurants nationwide. The average ezCater order is over $400. The acquisition will help Uber better compete with DoorDash (DASH.US), the leading US food delivery platform, which launched its employee catering service in April.

Rumor: Apple (AAPL.US) partners with LG in smart home push; doorbells, thermostats, cameras to carry LG branding. According to insiders, Apple (AAPL.US) is stepping up its smart home device efforts, including doorbells, thermostats, and other accessories, with these products being co-developed with LG Electronics in an unusual collaboration. The products will join an ecosystem that works with Apple's new smart home hub and will be compatible with the upgraded HomePod mini and a new TV set-top box. Apple's own new smart home devices are set to be launched October 13. Insiders say Apple and South Korea's LG are collaborating on products including smart door locks, indoor and outdoor security cameras, and floodlight cameras. Although both sides are involved in development, the products will carry the LG brand, with LG responsible for manufacture and support.

Hollywood giant Skydance (SKYD.US) officially established. On Tuesday, local time, Paramount and Skydance completed their $110 billion mega-merger with Warner Bros. Discovery (WBD), and the merged entity is officially named "Skydance", marking the birth of a new Hollywood giant. The deal consolidates studios behind Mission: Impossible, Harry Potter, and DC Films, as well as major TV and streaming networks including CBS, CNN, Paramount+, and HBO Max, creating a comprehensive entertainment company spanning film, TV, and news. The new company's stock was transferred from Nasdaq to the New York Stock Exchange under the ticker "SKYD" on Tuesday.

Microsoft (MSFT.US) expected to launch new Surface, targeting AI developers without reliance on cloud computing power. Microsoft will hold a special event in San Francisco on October 7, keeping the agenda under wraps. The company confirmed topics will include Windows, RTX Spark, and Surface, but hasn't released details. This is the first Windows and Surface-specific event since the 2024 Copilot+ PC launch. Expectedly, a key focus of the October 7 event will be new hardware utilizing RTX Spark. The Surface Laptop Ultra already debuted in June, and more details on hardware specs, performance, and availability are expected at the San Francisco event.