Stock futures traded mixed Monday morning as investors closely monitored developments in Washington, D.C., as lawmakers rush to try and avert a government shutdown. Yahoo Finance's Julie Hyman, Brian Sozzi and Brian Cheung weigh in.
Video Transcript
JULIE HYMAN: But first here this morning, let's take a look in a little more detail on what's going on in the markets, because it is a very interesting morning following an interesting weekend in terms of the action. Let's start with the futures on the YFi Interactive this morning, because as I mentioned, we are seeing them deteriorate. There you've got the S&P and the NASDAQ and the Dow.
If you take a look at the Interactive, I've got the intraday chart up here. And you can see that overnight we were actually in the green. It is only this morning that we've seen futures start to roll over as various things are starting to weigh on the markets. And we're gonna dig more into these in just a moment just to give us a little bit of a road map here.
Got to talk about what's going on in crude oil futures, where we are seeing WTI push above $75 a barrel. Brent is also on the rise. And there's an interesting call out from Goldman Sachs this morning. Again, more on that in a moment.
And then the other key asset that I am watching this morning is the 10-year yield. 1 and 1/2% is where we are now. Now, it's still-- all the usual caveats, still by historical metrics very low. But nonetheless, we have seen quite a bump up in yields in just the past week or so. Here's the one-month chart just to give you a little more context on that move. But it has been a notable move to say the least on yields, even as we are still getting very sort of modest and measured guidance, if you will, from the Federal Reserve.
So with that, let's take these things one by one. And let's start, first of all, with what's going on with those oil prices. And this is a call I know you've been watching this morning, Sozz, coming out from Damien Courvalin, the team over at Goldman Sachs, about how high they think potentially oil prices could get here.
BRIAN SOZZI: Yeah, the Goldman team Julie, looking, for $90 a barrel oil. Previously they had some of the highest estimates in the market, at about $80 a barrel here. They say we have long held a bullish view, and that is to say the very least. Again, Goldman coming out here, highlighting, raising that price tag on oil, in large part because of tight supplies. Also they cite a snapback in global economic demand as we continue to recover from the depths of the pandemic. So Goldman very bullish and I think rattling a few trading desks on the Street here, Julie, and rightfully so.
Look, we had, I would say, somewhat disappointing durable goods orders this morning here. Supply chains continue to be a big problem. I wrote about this in the Morning Brief Newsletter. We'll talk more about it later. The last thing global businesses want to see right now is rising gas prices and rising oil prices. And then oh yeah, if you're a consumer in your home, you might be paying $100 more for heating oil this winter, which, again, will take a bite out of your financial bottom line.
JULIE HYMAN: Yeah, and just one quick thing to mention, that $90 call on oil is with Brent Crude specifically, which tends to trade a little bit higher, at a little bit higher price than does WTI. Right now it is at about $79 a barrel. So just something to note there as we look at that. And then let's take it to the treasuries, right, and the other asset class that we're watching very closely in that big bump-up that we have seen in yields here this morning. Obviously, Brian Cheung, that's something that you watch closely.
BRIAN CHEUNG: Yes, certainly, especially with the hook to the Federal Reserve. But it's, of course, humbling to remember that any sort of movement that happens in especially longer dated US treasuries could be due to a number of factors. It could be changes in inflows or outflows from other countries because of the desire or just kind of not desire to have US dollar-denominated assets.
But we have seen a rip up in treasury yields that has extended the rip off that we saw post FOMC last week, when the Federal Reserve not only signaled its intention to likely begin the tapering process in that early November meeting, but also to maybe have a faster reaction function and a more aggressive reaction function to interest rates rising through 2024. That's a big reason why we saw the 10-year get close to 150 basis points.
And also take a note at the 30-year breaking the 200 basis point level. I think right now, we're looking at about actually just 200 basis points flat on the 30-year. Again, still historically low levels compared to what we saw earlier in the spring.
But still notable that these longer-term bond yields are rising some of that could be just simply inflation expectations. If inflation expectations are rising, that can mean nominal bond yields tilt up. Maybe oil is a part of that explanation as well. But, of course, we'll see how Fed officials who are starting to climb out of that FOMC blackout period try to talk a little bit further, as we expect to hear from a number of other Fed officials later this week.
BRIAN SOZZI: Right, Brian, good point there on inflation. That's some of the chatter I'm seeing just in my convos via email with folks on the Street. It looks to be concerns about inflation sending yields higher. But I would also add this-- why would you want to own treasuries if the government could shut down? So I encourage lawmakers who are batting this week and they have a lot on their plate, we'll talk a little bit about it very shortly-- why would you own treasuries here?
And I'm just waiting, Julie, for the market to react negatively to higher yields. We have consistently seen this over the past few years. When yields rise or approach that 2% level, stocks come under pressure here. If lawmakers are looking to push the debt ceiling debate to the edge, I encourage them to look what's happening to yields. Look what could happen here in the markets as well.
JULIE HYMAN: Well, you're feeling some negativity today generally. But we'll get to that later in the show, Brian.