To The Moon

Crude oil climbed for a third week as output cuts from the world’s two biggest producers — Saudi Arabia and Russia — played their desired role. WTI rose above $90 a barrel.

Forecasts for a supply deficit going into year-end are underpinning calls for $100 crude in the not-too-distant future amid signs that China’s economy is stabilizing and the US’s extended resilience despite the Federal Reserve’s epic rate hikes.

Testing the century mark again?

The bond market, meantime, remains massively skeptical that this rally means much at all. Breakeven rates — the gap between yields on regular Treasuries and those on bonds protected against inflation — have increased at a far more modest pace.

That is probably due at least partly to the Fed’s success in bringing core inflation down to a 4.3% annual pace from the 6.63% peak seen a year ago. There’s also perhaps an appreciation that Saudi Arabia and Russia can readily unwind their current, ad hoc output cuts.

Economic news this week

The Fed's FOMC is not expected to raise rate (full preview) but could tilt a little more to the hawkish side after a stronger-than-anticipated inflation report for August. Economic reports due during the week include updates on housing starts, crude oil inventories, and initial jobless claims.

The week could also see some extra drama on the political front as the countdown continues toward a potential government shutdown on October 1.

Investors will also have their eyes on the battle between the United Auto Workers union and Detroit automakers, which could start to have ramifications for dozens of stocks. Weighing in on the auto sector disruption, analyst Doron Levin called the UAW strike a self-inflicted wound for a declining Detroit-based auto industry, while other analysts have said Tesla (TSLA) looks like a clear beneficiary from the labor squabble.

Driving up a steady uptrend for a few weeks

⚠️ Trading tips: looking at calls above 275 and puts under 271 on Monday. Can we see another week of bullishness or testing the lower channel pullback for the time being?

Finally, there remains an undercurrent of concern about that resilient economy. This year’s equities surge has been concentrated in AI-exposed sectors, while small caps are limping along to signal that a downturn remains possible.

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