Let's get to the big story breakdown. While U.S. Treasuries are facing a selloff as five year yields surge past 5% for the first time since 2006 following a weak $70 billion auction yesterday. Now, a trifecta of stronger than expected economic data, Brent crude climbing back above $100 a barrel and hawkish Fed remarks are reigniting inflation fears, sending equities tumbling.
Well, joining us live from the trading floor here at the New York Stock Exchange this morning is Matt Cheslock, equity trader at Virtu Financial. Good morning, Matt. Thank you so much for joining us this morning, Randy.
How are you?
Well, all of us are paying attention to Treasury yields, not just in the U.S. but around the globe. So what do you make of the moves we've been seeing?
Well, it's interesting. You know, the 10 year broke above 5% the other day. It did raise some alarms, right? And then it settled back below 5%. And everyone thought, okay, it was just a test. Yesterday, you know, it was a real wake up call. You know, what we saw based on some of the macro data that we got, some of the PMI that was the strongest that we've seen in five years.
You know, all these things seemingly are good, but we can't get a handle on inflation. I think that's the biggest point. 2% inflation is not realistic anymore. So to try to get the gauge at 2% to manage the rest of it is just impossible. And I think we need to move on from that and understand that we have inflation, especially with oil where it is. We've got to counter things another way.
We can't cut rates. That's not even close. We just can't do it. And so the Fed is in a real bind here about hiking rates.
Yeah. And indeed the Federal Reserve raised interest rates at their last meeting and their expectations of more rate hikes on the way here. But we have to keep in mind, as you mentioned, that oil remains elevated. And as a result of higher energy prices, diesel is at a record high. And there is only so much that central banks can do when it comes to monetary policy here.
So what do you make of the inflation outlook?
Well, it's interesting. You know, we kept interest rates so low for so long. So central banks can do something, right? They did it for a long time. So, you know, it's interesting. We've just got to get back in line and that's it. I mean, diesel prices at this price is unsustainable. Farmers just can't operate this way.
So we've got to get oil back down. At least the headline number. I think a majority of Americans, as we approach midterms here, that's going to be an important feature. You know, I mean, we're bumping up against this pretty quickly. I don't think oil can really have a move lower that's going to impact the psyche of a voter.
And you know, when you see diesel at $7 and you try to get your ground beef and it's $10 a pound when it was $4 or $5, that's real inflation. So you can't strip that out. That's what mainstream feels.
And indeed, when we're talking about Main Street, all of us face increased costs wherever we go, whether we're talking about the gas station or we're shopping for groceries on a weekly basis, we feel that pain at the pump as well as at the grocery register. So as we move forward this week, we have been focused on the UN General Assembly.
But tonight, of course, all eyes on the White House as that gathering takes place between Xi Jinping and President Trump. And it's really interesting because we're going to have tech titans, as well as the leaders of some of the biggest financial institutions that will be there. So what are your expectations?
Wow. I think it's pretty exciting that we can get the premier of China in the U.S. for a discussion at dinner with some of our biggest leaders. This is momentous. So do we expect anything to come out of this immediately? Probably not, but it is groundbreaking. And I think it's important that our tech leaders get to say their piece, our financial leaders get to say their piece in such a confined setting. I think that's the important, that's progress.
So hopefully I would anticipate another round of this and maybe we get some real deal, you know, diligence done amongst these groups.
Yeah. And as we are ending the final weeks of Q3 here in 2026, and as the UN General Assembly and Climate Week here in New York City wrap up, we get ministers from different nations here at the New York Stock Exchange ringing the bell. But that does mean the countdown is on to the upcoming earnings season.
So I do want to get your take on different sectors, the AI trade, as well as what all of this pressure means for markets when we're looking at yields.
Well, increased rates, right? That means more borrowing costs. And you know, we're already seeing it from Oracle today. You mentioned that, you know, how are they going to finance these big data centers, right? That was easy money for so long. That's not going to be the case anymore. So, besides the public perception of not having a data center in your neighborhood, now the costs are ramped up.
So that's going to be a real issue as we go forward. It's not so much what you did for me last quarter. What are you going to do for me in the future? And higher rates will affect future outlook.
And finally, before I let you go, we're paying attention to, you know, just be it as well as energy sectors. But we're keeping an eye on other sectors as well as market breadth. So what are you seeing?
Well, it's interesting. Financials have been really soft this week. You know, we had some news out of Meta the other day that was the driver, you know, with their new program use, you know. And so the financials really took one on the chin. And that was kind of an underlying thing that no one really talked about because of oil, because of, you know, rates rising and some of the tech names.
So that's one to keep an eye on. I think as we go forward here, especially as we start earnings season, they usually surpass and they're usually one of the first ones to report.
And finally, before I let you go, I do want to ask your take on seasonality and what role it actually plays, especially given the fact that it is a midterm election year.
I think that's an overriding factor. You know, I mean, seasonality. We're past the summer. We're past the school season now. We're in between Christmas season. So this is kind of a softer time, as I mentioned. So people are going to focus on certain outlooks that companies will give them. And again, that's going to move the market.
Well, a lot to keep our eyes on. So Matt, I appreciate your time. Thank you so much for joining us today.
