Last night, oil prices jumped on reports that the U.S. sent a third aircraft carrier to the Middle East. That would add up to 10,000 American troops. China reportedly suspended the export of oil products.
The combination of those two developments sent WTI crude prices to $93.01/bbl. Brent crude remained high at $102.60.
China’s halting of October fuel exports removes another source of diesel that the world needs. Expect jet fuel prices to rise, if not stay at currently elevated levels. Stock markets priced in the negative impact of high jet fuel. American Airlines (AAL) and Southwest Airlines (LUV) are down from July’s highs. Carnival (CCL) and Royal Caribbean (RCL) are also lower, although they rebounded dramatically in the last week.
On Thursday, U.S. bond yields continued their decisive rise only to lose momentum by around noon. The 2-year T-bill closed at 4.81%, below the 4.91% intraday high. More importantly, the 10-year T-bill closed at 5.26% compared to the 5.31% intraday high. The bond market weakness remains a significant risk for stock markets. The hot AI sector is lifting U.S. GDP. The strong economic growth, strong job market, and elevated inflation rates for the last few years would set 5.0% to 5.5% as the baseline yield for both the 10-year and 30-year Treasury bonds.
Continue to avoid telecom stocks like Verizon (VZ) or T-Mobile (TMUS). REITs like W.P. Carey (WPC) face substantial selling pressure.
