Monday's Final Takeaways: Crude Oil & Yields Elevated, China Eyes NVDA Purchases

Marley Kayden (0:00)

Welcome back to Market on Close. I'm Marley Kayden here in Chicago, alongside Sam Vadas of the New York Stock Exchange. Some final thoughts to close out the session today. Of course, oil has been a top-of-mind one every day on every session, but again, moving higher today. We had Brent Crude trading around $106 a barrel. WTI is hovering just below 93 right now. We did get higher in the session after President Trump rejected Iran's proposal to reopen the Strait of Hormuz, keeping uncertainty around global oil supplies elevated. That comes as Americans are already facing sharply higher fuel cost, diesel prices at record levels, gasoline currently sits at 447 a gallon nationally, as the conflict continues to disrupt energy markets. At the same time, the Trump administration has finalized new lower fuel economy standards that would require the US fleet to average 34.9 miles per gallon by the year 2031 versus the 50.4 miles per gallon that required under the Biden era standards. The administration says that the rollback will make new vehicles cheaper and give consumers more choice, while critics argue that less efficient vehicles ultimately means greater fuel consumption and carbon dioxide emissions. Both of those things came to pass today, but treasury yields also have been a huge conversation, moving higher again today, the 10-year climbing above 5.2 percent, the 30-year topping 5.5 percent, as a global bond sell-off puts pressure on the US treasuries. We're seeing the highest levels in 19 years, as those oil prices revive inflation concerns, investors remain focused on persistent fiscal deficits, heavy government borrowing, and the possibility of an additional Fed rate hike or multiple hikes this year. The 10-year touched the highest level since 2007, underscoring just how significant the rise in long-term borrowing costs has become for everything from mortgages to corporate financing and equity valuations. Investors are now turning to this week's inflation and labor market data, including the PCE and the Friday jobs report, for clues about whether this pressure on yields is likely to continue. And this is of course coming as we're about to kick off earning season here as well. Sam, but what caught your eye during the session?

Sam Vadas (2:05)

Yeah, something that wasn't talked about too much today, that the US and China have now agreed to cut tariffs on $60 billion worth of goods. The two sides releasing a reciprocal list earlier today on products worth roughly $30 billion each. As for the US side, there are about 1,600 goods entering China, heavily focused on agricultural products. Meanwhile, over 70 categories were covered by the Chinese side for export to here in the US., including fireworks, homewares, toys and Christmas decorations. So there is a view that if the tariff cuts are made before the holiday season, it could be good for US retailers and consumers, but it's not clear when the reductions could actually happen or by how much. President Xi and Trump are set to meet again in Shenzhen in November.

But the Chinese government has also reportedly signaled it would allow some domestic companies like Alibaba and ByteDance to buy Nvidia's RTX Pro 5500 chips, 5500 I should say. According to the information, Chinese authorities have asked companies to report their plans for the chip, which is made for high-end professional computers and is not banned, unlike Nvidia's most powerful accelerators. So interesting that we did see domestic Chinese chip stocks falling overnight on the thinking that Nvidia's product could actually reduce demand for local alternatives. We didn't see too much follow-through in the US session here with Big Cap Tech. But heading into tomorrow, Marley, what are you going to be looking out for?

Marley Kayden (3:28)

We'll get Carnival Cruise Line's report in the morning. Analysts expecting EPS to fall by close to about 5%. That'll be down to $1.36 per share on revenue of $8.37 billion.

Now the company gives us this first look at how the overall industry performed in Q3. It has also beat on expectations the last four consecutive quarters. But one interesting note about Carnival, it doesn't hedge its fuel costs. It may be the only cruise liner that doesn't. So we'll see how that came into play during the quarter with the elevated oil prices. But a nice look here potentially into Q3 for the rest of the cruise liners. Royal Caribbean had a very nice day with some upgrades today as well.

Sam Vadas (4:06)

Yeah, it certainly did. I'm going to be looking at the data tomorrow. We've got consumer confidence, another big sentiment indicator which could be a major market mover given how much we saw. The markets, particularly yields move off the back of Umich last week. This continues to show that divergence between strong eco data and how consumers are feeling right now. We'll also get jolts and just remember, in a week where we get a lot of other jobs data, the jolts typically lags all other job metrics by about a month. So something to take into mind tomorrow, Marley.