Morning Reads

Morning Reads

Todays Open Interest Change



Limited supply

The latest data out of Cushing, Oklahoma, the nation's major oil storage hub, has commodity traders on edge again, with a steep drop in inventories compounding worries about tight global supply. Last night, WTI crude futures (CL1:COM) even touched $95/bbl at 9 PM ET, continuing a big rally that began at the beginning of the summer. In fact, crude has soared about 40% over the past three months, with West Texas Intermediate jumping another 3.6% on Wednesday, marking its biggest gain since early May.

Inflation watch: Further drawdowns at Cushing would spell more trouble for an already tight oil market due to the deepening supply cuts from Saudi Arabia and Russia. Inventory levels in Cushing have been cut in half since June, and now stand at just below 23M barrels, or a level that's close to the operational minimum. If tank storage falls below 20M barrels, the oil can become sludgy and difficult to remove, potentially adding to upward pressure on prices and renewing fears of inflation.

"The U.S. has, in essence, bailed out the rest of the world from an oil supply shortage, but that is about to come to an end," writes Investing Group Leader HFI Research. "U.S. crude storage will not build during refinery maintenance season [in October]... and one of the bear factors was demand, but demand is holding up well." Oil stocks have also reflected similar sentiment since the summer, with big gains seen for companies like Chevron (CVX), Conoco (COP), EOG Resources (EOG), Exxon Mobil (XOM), Hess Corporation (HES), Occidental Petroleum (OXY), Pioneer Natural Resources (PXD), Schlumberger (SLB) and Valero (VLO).

What else to watch: Bond yields are climbing along with oil prices, with the 10-year Treasury yield topping 4.6% on Wednesday. If things keep going, it can rekindle some fears and lead to the third consecutive year of losses for the bond market - a development that last happened in the early 1970s. That will have broad implications for other asset classes and currencies, with higher bond yields making the greenback more attractive. The next catalyst investors are also eyeing is tomorrow's key inflation data, with a reading on the core Personal Consumption Expenditures Price Index. (2 comments)

Another strike?

Two labor unions in Nevada, the Culinary Workers Union Local 226 and Bartenders Union Local 165, overwhelmingly voted to authorize a strike on the Las Vegas Strip, although a deadline hasn't been fixed yet. The contracts for about 40,000 workers at 22 casino resorts owned by MGM Resorts (MGM), Caesars Entertainment (CZR), and Wynn Resorts (WYNN) expired on Sept. 15. Workers' demands include "the largest wage increases ever negotiated" in the Culinary Union's history and better working conditions. This strike would be the latest in a series of walkouts the U.S. has seen in recent months, including the now-ended Hollywood writers' strike and the Detroit strike, which may be expanded soon.

Exercise shocker

Battling over the connected fitness market for years, Lululemon (LULU) and Peloton (PTON) have inked a five-year global partnership that could change the exercise equipment and services landscape dramatically. Peloton will become Lululemon's exclusive digital fitness content provider and Lululemon will become Peloton's primary athletic apparel partner. Apart from initiatives to step up brand awareness and reach, a select number of Peloton Instructors will become Lululemon Ambassadors, while Lululemon will also discontinue its Studio Mirror device. The news sent Peloton soaring 15.7% after hours on Wednesday, while Lululemon ticked up slightly. (13 comments)

Soft landing

Bank of America (BAC) CEO Brian Moynihan said the bank's strategists still expect the U.S. economy to achieve a soft landing instead of a recession, on account of continued strength in consumer spending. He noted that the Federal Reserve is winning the battle against inflation, but flagged the risk of going too far in policy tightening. As for the 'Basel III endgame' proposal, Moynihan joined his counterparts in saying they would make U.S. banks less competitive. SA Investing Group Leader Lawrence Fuller also believes overall incoming economic data indicates a soft landing in 2024, but Bret Jensen feels the odds of a significant economic storm seem more than plausible. (2 comments)

Today's Markets

In Asia, Japan -1.5%. Hong Kong -1.4%. China +0.1%. India -0.9%.
In Europe, at midday, London -0.4%. Paris +0.2%. Frankfurt flat.
Futures at 7:00, Dow +0.1%. S&P +0.1%. Nasdaq -0.1%. Crude -0.2% to $93.51. Gold +0.1% at $1,892. Bitcoin +0.1% to $26,503.
Ten-year Treasury Yield +2 bps to 4.64%.

Today's Economic Calendar

8:30 GDP Q2
8:30 Initial Jobless Claims
8:30 Corporate Profits
9:00 Fed’s Goolsbee's Speech
10:00 Pending Home Sales
10:30 EIA Natural Gas Inventory
11:00 Kansas City Fed Mfg Survey
1:00 PM Fed’s Cook's Speech
1:00 PM Results of $37B, 7-Year Note Auction
4:00 PM Jerome Powell: “Conversation with the Chair: A Teacher Town Hall Meeting”
4:30 PM Fed Balance Sheet
7:00 PM Fed’s Barkin: U.S. Economy and Monetary Policy

Companies reporting earnings today »

What else is happening...

Why does this shutdown selloff look different?

Meta (META) shows off Quest 3 headset, AI updates.

GameStop (GME) pops after naming Ryan Cohen as CEO.

Morgan Stanley lists high dividend-paying stock picks.

Johnson Controls (JCI) hit by ‘massive' ransomware attack.

Judge rejects Exxon's plan to restart offshore oil platforms.

Micron (MU) slips as mixed outlook overshadows results.

UBS, Credit Suisse face wider scrutiny over Russia sanctions.

Elizabeth Warren asks JetBlue CEO if Spirit deal will raise fares.

Uber (UBER) ropes in Analog Devices (ADI) exec as new CFO.

Known to most as Uranium Pinto Beans, Jason has more than 15 years under his belt of trading stocks, options and currencies. His expertise primarily lies in chart analysis, and he has a strong eye for undervalued stock. Because he’s got the ability to identify great risk/reward trades he usually enjoys taking the path less traveled and reaping the benefits from the adventure.

He is a co-founder of Option Millionaires, and he is best known for his weekly webinars with Scott, as well as his high level training webinars and charts found in the forums.

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