Yield Shock: 30-Year Rates Hit 5.7% as Fed Minutes Loom

Grant Calloway

Welcome to the Bull Sheet podcast. I'm Grant Calloway. Yesterday I asked whether this rally was brave or blind against a ten year yield north of five point three percent. Well, the market's first answer this morning is a polite "ouch." Stocks opened lower after record closes for the S&P 500 and Nasdaq on Tuesday.

Grant Calloway

Here's the headline. The Fed releases the minutes of its September fifteenth and sixteenth meeting at two o'clock Eastern this afternoon. That's the meeting where policymakers raised rates by a quarter point. The only question traders care about is whether that hike was a one off, or whether the minutes lay the groundwork for another move at the October twenty seventh and twenty eighth meeting. As of Tuesday, traders were pricing roughly twenty percent odds of an October hike. Not a coin flip, but not nothing either.

Grant Calloway

And the bond market isn't waiting politely. The thirty year Treasury yield jumped to about five point seven percent this morning, the highest since 2002. The ten year climbed to roughly five point three five. That's a long bond at a twenty four year high, and it's the number that decides what a mortgage costs, what a refinance costs, and what a stock is worth when you discount its future. The minutes will be parsed word by word. Look for any hint of how much patience this committee has left.

Grant Calloway

Now the tape. Early on, the Dow was down somewhere between six tenths and nine tenths of a percent, roughly three hundred to four hundred seventy points, around fifty one thousand. The S&P 500 was off about half a percent, near seventy seven hundred seventy to seventy seven eighty five. The Nasdaq Composite was down in a range of about half a percent to nearly nine tenths. Small caps felt it more. The Russell 2000 ETF, ticker IWM, was down around one percent. And a reminder from Yahoo Finance's Brian Sozzi: Nvidia, Apple, and Microsoft make up roughly a fifth of the S&P 500. So a record index and a healthy market are not always the same thing.

Grant Calloway

Oil bounced right back. Brent is back above one hundred one dollars, near one hundred two, and WTI is around ninety. UK officials have reported at least nine attacks in the Strait of Hormuz so far this October, and a tropical storm is nosing toward the Gulf Coast, possibly a hurricane by Friday. Chevron is pulling nonessential staff off offshore platforms. At the pump, gasoline averages four thirty six a gallon and diesel is six thirty. President Trump said Tuesday the administration is "thinking about" suspending the federal gas tax. That's a quote, and it's the whole quote.

Grant Calloway

Elsewhere, the dollar index is up about half a percent near one hundred two, with the euro sliding toward seventeen month lows. Gold is down about one and a half percent, around forty one eighteen an ounce. Silver fell nearly three. And Bitcoin dropped about three percent as roughly five hundred fifty million dollars in leveraged crypto bets got wiped out, per Bloomberg.

Grant Calloway

Movers, and let's keep it moving. Constellation Brands is the answer to yesterday's question, and it's a messy one. The Corona and Modelo maker beat on adjusted earnings, three seventy four a share against three fifty five expected, and on sales, two point six three billion against two point five four. It reaffirmed full year guidance of eleven twenty to eleven ninety a share. And the stock fell about five percent in premarket trading anyway. Why? Distributors were restocking, so shipments overstated real consumer demand. Modelo Especial and Corona Extra sales declined, and grocery and convenience store sales during the World Cup came in below industry expectations.

Grant Calloway

Lamb Weston, the french fry people, is up around two to three percent after beating, seventy four cents adjusted against fifty nine expected. On the other side, utilities are getting hammered by yields. Alliant Energy is down about eight percent, Vistra is off roughly three and a half, and Constellation Energy gave back about three percent after Tuesday's pop. Enphase is down around four. Mohawk Industries, a housing proxy, is off four percent or more, because five point seven percent on the long bond does not help anybody selling floors. Equifax, meanwhile, is up over five percent, and Hartford is up about two. Robinhood is down around three with crypto. And in semis, Astera Labs is down near seven and Teradyne about four and a half, even as AMD slipped despite a Citi note on CPU demand from agentic AI.

Grant Calloway

Quick word from our sponsor. Jellypod turns your sources and ideas into a podcast like this one, ready to publish. Check it out at jellypod.com. Back to the tape.

Grant Calloway

Bull versus bear. The question: can earnings and the AI buildout outrun five point seven percent on the long bond and oil above a hundred? I'll argue both sides, then tell you where I land.

Grant Calloway

The bull says look at the operators. Third quarter earnings growth estimates have been revised up toward thirty percent, after something like fifty in the second quarter. Lamb Weston beat. Constellation beat and held guidance. And the CEO there said that if September trends continue, the company would land at the high end of its range. Meanwhile, Citi argues agentic AI could grow the CPU market from twenty nine billion dollars in 2025 to three hundred billion by 2030. That's a new addressable market, and the bull says earnings are the antidote to rates.

Grant Calloway

The bear answers with Constellation's own tape. A beat, and the stock falls anyway? That's the market reading the fine print. Restocking is not demand. The flagship brands shrank. And a five point seven percent thirty year yield makes mortgages, refinancing, and utility borrowing costs structurally heavier. With oil above a hundred, the Fed has no room to ease, and a Fed that can't ease is a Fed that might hike again. Add a market leaning on three stocks for a fifth of the index, and the bear says the rally is standing on a very narrow pier.

Grant Calloway

Here's where I land. The bull has real numbers, but they're estimates, and estimates are promises. The bear has real prices, and prices are facts. I've traded through two crashes, and when the promise meets the fact, the fact usually wins the first round. That doesn't mean the rally is dead. It means it's earning its keep against a tougher discount rate. Brave, not blind. But brave with a bruise. That's a read, not advice.

Grant Calloway

On deck, all times Eastern. Seven a.m., MBA mortgage applications, which fell six percent the prior week. Ten thirty, EIA crude inventories, with consensus looking for a build of about one point nine million barrels and distillates down about two point one million. One o'clock, the ten year note auction, a real test of appetite for duration. Two o'clock, the Fed minutes. Three o'clock, consumer credit. After the close, Levi Strauss and Applied Digital report. Constellation told us about the consumer. Levi's gets to add its own chapter.

Grant Calloway

What matters most today is the one o'clock auction and the two o'clock minutes, in that order. If the auction goes badly, the minutes land on already rattled nerves. Tune in tomorrow, when PepsiCo reports before the open and jobless claims come at eight thirty. And as the old floor saying goes, the market can stay irrational, but the bond market always collects. This podcast is for educational purposes only and is not investment advice.