September 23rd Market Overview

Happy Wednesday

Good news for the economy turned into bad news for stocks today.

U.S. business activity grew at its fastest pace in more than five years, and bond traders heard one thing → more Fed hikes.
I’m keeping it in perspective though, the Nasdaq closed at a record just yesterday.

Let’s dig in...

Today's Big Picture

1. The 10-Year Yield Hits a 19-Year High

The 10-year Treasury yield closed at its highest level since July 2007. It was the biggest one-day move since April 2025. The spark was that same business survey, which showed company costs rising at their fastest pace in four years. Mortgage rates followed, hitting their highest since 2024.

2. The Fed Isn't Done Hiking

Fed Governor Michael Barr said more rate hikes are "likely to be needed," a week after the Fed's first hike since 2023. His case: the job market is solid, and inflation isn't coming down fast enough. Traders now put the odds of another hike in October at about 7 in 10. A month ago, those odds were less than 1 in 10.

3. McDonald's Doesn't Expect Relief Soon

McDonald's $MCD CEO Chris Kempczinski expects high inflation and flat traffic to keep weighing on the whole restaurant industry. The stock fell to its lowest since 2022 and is on pace for its longest weekly losing streak since 2014. It doesn't help that Burger King grew U.S. same-store sales about ten times faster last quarter.

Market Overview

Index Performance

Stock Spotlight

Cracker Barrel $CBRL ( ▲ 6.77% )  
earned 99 cents a share, up from 74 cents a year ago, and beat on revenue. Traffic slipped, but customers spent more per visit, and new CEO Dave Deno expects same-store sales to grow this fiscal year.

KB Home $KBH ( ▼ 2.57% )  
lowered its profit outlook as the housing market got tougher. It expects both deliveries and margins to come in below Wall Street's numbers.

Big Name Updates

General Mills $GIS ( ▲ 0.93% )  
COO Dana McNabb said four in ten shoppers used an AI tool to buy food in the past month. It expects AI shopping agents to drive about a fifth of food sales by 2030.

Nike $NKE ( ▼ 1.09% )  
got another tough read from sneaker retailer JD Sports, which reported falling sales and profit. JD's CEO says young shoppers want running shoes over fashion sneakers because "running clubs are becoming the new nightclubs."

Morgan Stanley $MS ( ▼ 0.93% )  
had a banker accidentally email some clients an internal list of more than 100 deals it's pitching and tracking in Asia. Last week, a co-president called that pipeline "very, very robust," and now a few outsiders know what he meant.

Other Notable Company News

Blue Chips
MarketBeat lists “7 Blue-Chip Stocks to Add To Your Forever Portfolio”

Paramount Skydance $PSKY ( ▼ 1.63% )  
settled an antitrust suit brought by several states, which clears the way for its Warner Bros. Discovery $WBD deal.

Six Flags $FUN ( ▲ 1.06% )  
now has activist investor Jana Partners pushing it toward a sale, the Wall Street Journal reported.

Charles Schwab $SCHW ( ▼ 0.79% )  
and other brokers have been under pressure this week on fears that AI agents like Meta's Muse will eat into their fees.

SpaceX $SPCX ( ▼ 4.27% )  
, OpenAI and Anthropic could be worth over $5 trillion combined, which is more than all IPOs from 1980 through 2025 put together, per the Financial Times.

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Sector Watch

Bond Market

The Treasury sold $70 billion of 5-year notes at the highest yield since June 2006. Buyers wanted more yield than expected, and yields hit their highs of the day right after. The 2-year yield reached its highest since 2024, and the dollar climbed to its strongest level since July.

Policy Watch

Fiscal & Trade

Trump's diesel export ban could end up softer. The Energy Secretary hinted at a voluntary cap instead, and Trump said a decision would come "fast."

• The U.S. is the world's biggest diesel exporter, with about a fifth of seaborne supply.

• Diesel is at a record $6.52 a gallon, per AAA, and the midterms are in November.

• European diesel futures climbed sharply on the talk. Europe is already short on fuel from the Middle East and Russia.

• The oil industry warns a ban would backfire and push prices higher.

International

Brent snapped a five-day losing streak and traded back above $100. Hopes from Tuesday's three-hour U.S.-Iran meeting faded, and higher oil fed straight into today's inflation worries.

Europe's bonds sold off too. Eurozone business activity grew at its fastest pace in more than three years, and French 10-year yields hit their highest since the financial crisis. Traders now expect nearly a full percentage point of European Central Bank hikes over the next year.

What to Watch

Xi Jinping Lands in Washington

Xi arrives tonight for his first Washington visit in 11 years. Jensen Huang, Sam Altman and Sundar Pichai join him and Trump for dinner Thursday. Any headline on AI or rare earths can move tech fast.

Four Fed Speakers Thursday

The heads of the New York, Richmond, Cleveland and Philadelphia Fed all speak Thursday. If any of them push back on an October hike, bonds will notice. Jobless claims and new home sales also land Thursday.

Thanks for reading - you are now the more informed 🙂

- John

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