Core Insights - The article examines the historical trends of the 10-year Treasury yield since 1962, highlighting its fluctuations and relationship with key economic indicators such as the Fed Funds Rate (FFR), inflation, and the S&P 500 [1][4]. Treasury Yield Trends - The 10-year Treasury yield peaked at 15.68% in October 1981 during the Volcker era and reached a historic low of 0.55% in August 2020 amid the pandemic [1][2]. - As of the end of September 2025, the weekly average of the 10-year yield was 4.16% [1][5]. Federal Reserve Actions - The FFR was raised to a historic high of 20.06% in January 1981 to combat stagflation, leading to a peak in the 10-year yield shortly after [2]. - Following the 2008 financial crisis and the 2020 pandemic, the FFR was reduced to near-zero levels, with a record low of approximately 0.04% in May 2020 [3]. - From May 2022 to August 2023, the Fed raised the FFR to its highest level in over 20 years, with a recent cut bringing it to a range of 4.00%-4.25% [4][5]. Inflation Dynamics - Inflation reached its highest levels since the stagflation crisis, prompting the Fed to raise rates, although some argue these efforts were delayed [4]. - As of the end of September, inflation was reported at 2.92%, indicating a persistent concern about inflation remaining above the Fed's 2% target [5]. Market Relationships - Generally, equities and treasuries move in opposite directions, but during inflationary periods, both can rise simultaneously due to the impact of higher interest rates on corporate profits and bond prices [6]. - Adjusting the S&P 500 and 10-year yields for inflation provides a clearer understanding of real returns, revealing the severe impact of stagflation on equity values [7]. Federal Reserve Policy Insights - The Fed's historical extremes in the FFR demonstrate its ability to implement significant policy shifts in response to economic conditions, focusing on taming inflation in the early 1980s and promoting growth in more recent years [9][10]. - Despite high interest rates, the S&P 500 has shown resilience, achieving record highs even during periods of elevated rates [11].

Core Viewpoint - The Federal Reserve Bank of Chicago President Austan Goolsbee expressed concerns about rising inflation and the potential for tariff-induced price hikes to become a persistent issue, particularly if stagflation occurs [1][3]. Inflation Concerns - Goolsbee highlighted that inflation has recently risen after a period of easing from the 40-year high reached in 2022, which raises concerns for policymakers [2][3]. - He noted that inflation has been above the Fed's target of 2% for over four years, and the recent upward trend is troubling [3][6]. Dual Mandate Challenges - The Fed's dual mandate to maximize employment and stabilize prices presents a dilemma, especially if both inflation and unemployment worsen simultaneously [6][9]. - Goolsbee emphasized that if inflation proves persistent, it would create a challenging scenario for the Fed, complicating its ability to meet its dual mandate [3][6]. Economic Forecasts and Tariffs - Goolsbee introduced the "11% lane" framework to assess the impact of tariff-induced price hikes, noting that goods imports accounted for 11% of U.S. GDP in 2024 [10]. - Concerns were raised about tariffs affecting intermediate goods, which could lead to broader macroeconomic impacts and increased production costs [11][12]. Services Inflation - The trend of rising services inflation could indicate that tariff inflation is not a one-time event, which would heighten concerns for the Fed [13][14]. - Goolsbee expressed that if services inflation continues to rise, it would be difficult to attribute this solely to tariffs, suggesting a more complex inflationary environment [14].

Core Insights - Investors are flocking to gold despite the stock market reaching new highs, with gold prices up 43% this year and 84% since the start of 2024, while the S&P 500 has increased by 13% in 2025 [1][2]. Group 1: Market Dynamics - Gold typically performs well during economic downturns, but its recent rise is unusual given the strong performance of the stock market amid an AI boom [2][5]. - The simultaneous rally in both gold and stocks is attributed to inflation concerns and currency debasement rather than a traditional safe-haven trade [4][5]. - Inflation remains above the Federal Reserve's target, recorded at 2.9% in August, with high tariffs potentially pushing prices higher [3][6]. Group 2: Investor Sentiment - Concerns about inflation, fiat currency stability, and high levels of debt are driving investor behavior, indicating a possible stagflationary environment [5][7]. - The rise in gold prices, which surged 46% in 2025, is unusual given the typical lack of correlation between gold and stocks [7].

Economic Indicators - The US July S&P composite-20 home price index showed a year-over-year increase of +1.82%, surpassing expectations of +1.55%, but marking the slowest pace of increase in two years [1] - The August JOLTS job openings rose by +19,000 to 7.227 million, indicating a stronger labor market than the expected 7.200 million [6] - The September MNI Chicago PMI unexpectedly declined by -0.9 to 40.6, weaker than the anticipated increase to 43.3 [5][6] - The Conference Board's US September consumer confidence index fell by -3.6 to a 5-month low of 94.2, below expectations of 96.0 [6] Stock Market Performance - Stock indexes initially moved lower due to concerns over a potential US government shutdown but later recovered, with the S&P 500 Index closing up +0.41%, the Dow Jones up +0.18%, and the Nasdaq 100 up +0.28% [5][4] - Pharmaceutical stocks rallied, particularly Pfizer, which saw a +6% increase after agreeing to reduce some drug prices by up to 85% [4][15] - Chipmakers also supported the broader market, with notable gains from companies like Nvidia and Micron Technology, both closing up more than +2% [16] Corporate Developments - President Trump announced new tariffs of 10% on softwood timber and lumber imports and 25% on kitchen cabinets and related products, effective October 14 [6] - Rising corporate earnings expectations are seen as a bullish backdrop for stocks, with over 22% of S&P 500 companies providing guidance for Q3 earnings that are expected to exceed analysts' expectations [8] - Semtech closed up more than +15% after an upgrade from Oppenheimer Securities, while Freeport McMoRan rose more than +5% following an upgrade from Bank of America Global Research [19] Sector Movements - Energy producers faced declines as WTI crude oil prices fell by more than -1% to a 1-week low, impacting companies like Baker Hughes and Occidental Petroleum [17] - The pharmaceutical sector's rally was driven by Pfizer's price cuts, which may influence other major drugmakers to follow suit [4][15] - The technology sector, particularly chipmakers, showed strength, contributing positively to market performance [16]

Economic Indicators - The dollar index (DXY00) fell by -0.12% due to concerns over a potential government shutdown and comments from Fed Vice Chair Philip Jefferson indicating risks of stagflation, alongside a significant drop in the Conference Board US consumer confidence index to a 5-month low of 94.2 [1][3] - The US July S&P composite-20 home price index showed a year-over-year increase of +1.82%, surpassing expectations of +1.55%, although this represents the slowest growth rate in two years [2] - The US September MNI Chicago PMI unexpectedly declined by -0.9 to 40.6, falling short of expectations for an increase to 43.3 [3] Labor Market Insights - The August JOLTS job openings rose by +19,000 to 7.227 million, indicating a stronger labor market than the anticipated 7.200 million [3] - Fed Vice Chair Philip Jefferson noted risks to employment are tilted to the downside, while inflation risks are on the upside, reflecting concerns about the labor market's stability [4] Central Bank Policies - The markets are pricing in a 97% chance of a -25 basis point rate cut at the upcoming FOMC meeting on October 28-29, suggesting a shift in Fed policy [4] - The euro gained support from a weaker dollar and stronger-than-expected price pressures in Germany, with the German September CPI rising more than anticipated [5] - Central bank divergence is evident, as the ECB is perceived to be nearing the end of its rate-cut cycle, while the Fed is expected to implement two more rate cuts by the end of the year [6]

Economic Indicators - The US August JOLTS job openings rose by 19,000 to 7.227 million, indicating a stronger labor market than the expected 7.200 million [2] - The September MNI Chicago PMI unexpectedly fell by 0.9 to 40.6, weaker than the expected increase to 43.3 [2] - The Conference Board US September consumer confidence index fell by 3.6 to a 5-month low of 94.2, weaker than expectations of 96.0 [1][3] Stock Market Performance - Stock indexes are trading higher despite the risks of a US government shutdown, with the S&P 500 Index up by 0.25%, the Dow Jones up by 0.06%, and the Nasdaq 100 up by 0.12% [5][4] - Rising corporate earnings expectations are a bullish backdrop for stocks, with over 22% of S&P 500 companies providing guidance for Q3 earnings that are expected to beat analysts' expectations [7] Sector Movements - Chipmakers are supporting the broader market, with Nvidia up more than 2% and other semiconductor stocks also showing gains [14] - Energy producers are sliding, with WTI crude oil prices down by more than 1%, affecting companies like Baker Hughes and Schlumberger, which are down more than 4% [13] Tariff and Trade News - President Trump ordered 10% tariffs on imports of softwood timber and lumber, and 25% tariffs on kitchen cabinets and other wood products, set to take effect on October 14 [5] - Market focus this week will be on any new trade or tariff news, with expectations for the September ADP employment change to increase by 51,000 [8]

[Music] All right, good morning everybody. You're taking a look at live shots of the opening bell on a Wall Street on this Tuesday morning. Blue Owl ringing the bell down at the NYSE while Krenetics Pharmaceuticals getting things started up at the NASDAQ market site. Welcome to Opening Bid. Miles in for Brian Sazzy who is on assignment on this the final day of the third quarter. 75% of 2025 will be in the books at the close of business today. If you are behind on your New Year's resolutions, it's too late. ...

Group 1: Dollar Index and Economic Indicators - The dollar index (DXY00) is down by -0.13% due to the likelihood of a government shutdown and lower T-note yields weakening interest rate differentials [1] - The Conference Board US September consumer confidence index fell -3.6 to a 5-month low of 94.2, which was weaker than expectations of 96.0 [3] - August JOLTS job openings rose by +19,000 to 7.227 million, indicating a stronger labor market than the expected 7.200 million [3] Group 2: Federal Reserve Commentary - Fed Vice Chair Philip Jefferson expressed concerns about a softening labor market and increasing inflation pressures, hinting at stagflation [1][4] - Boston Fed President Susan Collins mentioned the appropriateness of a modestly restrictive policy stance to restore price stability while limiting labor market risks [4] - Markets are pricing in a 97% chance of a -25 basis point rate cut at the next FOMC meeting on October 28-29 [4] Group 3: Euro and Economic Conditions in Europe - The EUR/USD is up by +0.11% due to a weaker dollar and stronger-than-expected price pressures in Germany, with German September CPI rising more than expected [5] - Gains in the euro are limited by an unexpected decline in German August retail sales and a rise in German September unemployment [5]

Economic and Market Overview - The US government faces a potential shutdown if lawmakers do not pass a spending bill or continuing resolution by the evening, which could lead to widespread employee dismissals in government programs not aligned with President Trump's priorities [1] - President Trump has ordered tariffs of 10% on softwood timber and lumber imports, and 25% on kitchen cabinets and other wood products, effective October 14, with some increases starting January 1 [2] - The S&P 500 Index is down -0.17%, the Dow Jones is down -0.02%, and the Nasdaq 100 is down -0.30%, reflecting market pressure due to the risk of a government shutdown [6] Corporate Earnings and Expectations - More than 22% of S&P 500 companies have provided guidance for Q3 earnings that are expected to exceed analysts' expectations, the highest in a year, with an overall expected earnings growth of +6.9% for Q3 [7] - Paychex reported Q1 revenue of $1.54 billion, which met expectations, but the stock fell more than 6% following the announcement [13] - Vail Resorts reported a Q4 loss per share of -$5.08, wider than the consensus estimate of -$4.73, leading to a decline of more than -4% in its stock [14] Economic Indicators and Forecasts - The Chicago PMI unexpectedly fell -0.9 to 40.6, weaker than the expected increase to 43.3, indicating potential economic weakness [3] - The August JOLTS job openings are expected to increase by +19,000 to 7.200 million, while the Conference Board's consumer confidence index is anticipated to fall -1.4 to 96.0 [8] - The September nonfarm payrolls are expected to increase by +51,000, with the unemployment rate remaining unchanged at 4.3% [8] International Market Movements - Overseas stock markets are mixed, with the Euro Stoxx 50 up +0.14%, China's Shanghai Composite rising +0.52%, and Japan's Nikkei Stock 225 down -0.25% [9] Interest Rates and Bond Markets - December 10-year T-notes are up +4 ticks, with the yield down -1.0 bp to 4.129%, driven by safe-haven demand amid stock market weakness [10] - European government bond yields are rising, with the 10-year German bund yield up +0.8 bp to 2.715% [11]

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