New York morning trade. We are looking at the major U.S. stock averages opening higher while we are looking at yields lower. And this does come on the heels of the latest PC data. We are also looking at fed funds futures, pointing to just a 35% chance that the fed does hike at the October meeting. Now, recently, a punishing bond selloff drove 30 year Treasury yields to 24 year highs.
And Sabr research shows the correlation between crude oil and ten year yields surge to a 35 year high recently. Now, with elevated rates squeezing diversified sectors, equities are left increasingly dependent on AI or C, just as micron reports earnings after the close. Now joining us live from Robin Hood's Hood Summit in Houston, Texas is JJ Kinahan head of retail expansion and alternative investment products at Sebo Global Markets.
JJ good morning. Great to have you join us. Good morning from Texas. So given the fact. Yeah. And so we got a slew of economic data this morning. And of course, all of us were paying attention to PC. So tell us about the recent correlation when it comes to oil and ten year yields. And how are derivatives markets pricing in what we've been seeing when it comes to the energy driven inflation spike?
Yeah, absolutely. And as those watching have seen you know this has picked up and it's really had quite an effect on stocks. It really has been a situation of yields down oil up stocks down. And I'm I'm sorry. Bond yields up. Yes bonds down. So with that you know this bond selloff has really weighed on the stock market overall as well as the inflationary pressures that come along with crude oil.
But you know as you and I talked right before the rate hike, what we've seen is the market taking its medicine, everybody being more afraid of the rate hike than perhaps what's happened afterwards. Now we still continue to see some pressure on the bonds. It has lightened up over the last few days. We'll see if some of that cause may be because of the end of the quarter.
It's really interesting to me to see the market yesterday, see the market higher today because end of quarter you often see buying. In fact, if I look over the last ten years, I see that almost 60% of the time the S&P 500 is higher on the last day of the quarter. So I think that's something for viewers to look out for today.
Yeah. And JJ, you bring up an important point here because today is the final trading session for Q3 as well as September. And there's so many moving parts here. We did see the 30 year yield surging to 5.6%. And this also came as a massive $32 billion corporate debt offering from Paramount. Skydance hit the market.
So given all that is happening, would you see the yield spike as driven by systemic rate concerns or would you say portfolio crowding.
I would say it's more systemic rate concerns, to be quite honest with you. I mean, you know, we continue to see inflationary pressure overall. And again, it's great to see, I think for the average consumer, the price of crude oil coming off, as we just talked about a little bit, because that's where people's pocketbook feels at the quickest.
But we are still seeing other areas where people are feeling the pinch. And one of the other areas, you know, it's constantly this give and take. Yes, you raise rates to fight inflation and that is usually a great solution. However, the area that tends to suffer then is housing. And so as you just said, with that 30 year rate higher, with the ten year rate higher, the ten year being the one that affects mortgages, we're seeing a lot more pressure on the housing market as people are having a little bit more.
I don't want to say a tougher time, but certainly giving more of a second thought to that mortgage than perhaps they were just a year ago.
Yeah. And indeed JJ higher rates are weighing on diversified sectors leaving stocks dependent on AI. But you are joining us today from the Hood Summit Faller in Texas. So tell us about some of the many conversations that are taking place. And also tell us how retail is using options to hedge in this market.
Yeah of course. Absolutely. So you know, you talk about AI. It's one of the one of the definite subjects that brought up quite a bit in terms of using agents that are AI, in terms of some of the, you know, people being able to use AI to place orders. You talked about micron at the top of the show. I think it's important that, you know, people understand four options.
The options market always gives an implied move of a stock. One of the things we're seeing out of micron today is that there's a 6.5% implied move for the stock after earnings. And with that we've seen a lot of buyers on that 1100 call line. So I think that that's an area that people are going to want to try and keep their eyes on going forward.
And then, you know, one of the other stocks that I think people should keep their eye on today because for today's expiration and the stock trading right there is Tesla and Tesla. We've seen about, you know, one and a half times more than normal. Uh put buyers yesterday on the three 52.5 line to 350 line again right near the money.
So that's going to be very, very interesting in terms of those two. But to answer your question about what's going on here, you know, they also talked about we at our, our uh have an application in with the SEC to trade KPI contracts. That is what's the revenue Amazon makes from Amazon Web Services. How many cars will Tesla sell on a quarter, etc..
And so, you know, Robinhood said that once that's approved, they'll be ready to go with that. So we're really excited about that. And I think the other thing that Robinhood announced that was really interesting is their intention to go 24 over seven trading soon.
Yeah. Thank you, JJ, for that. I do want to get your perspective on the nation's capital, especially as the white House gathering yesterday wrapped up with President Trump rejecting strict AI guardrails in favor of self-regulation. So how does this new regulation outcome remove policy headwinds for big tech flows?
And are you still calling it AI, or should it be? Sy.
I'll stay with AI for now, but I do like the Sy. Rami. Um, with that said, I think that it definitely helps these companies because you don't have to go to a governing body in order to do a release. You know, at the end of the day, technology, particularly that technology, which is so quickly moving, is reliant on getting out the door to have a 30 or 45 day delay while someone goes and reviews the code.
Actually, I think, really slows them down. That said, I do think the AI companies, if they actually think something is dangerous, shouldn't be releasing it. That's part of self-regulation, is making sure that you're not releasing things that you feel are destructive. But let's, you know, we see how quickly AI is coming into all our lives.
People, whether they realize it or not, are using it on a daily basis. I think we're seeing so many of the benefits of it. But with self-regulation comes responsibility. And I think that the market is, you know, happy that there can be self-regulation. But the firms do have to take the responsibility side very seriously along with that.
Yeah. And JJ, finally, before I let you go, we are all counting down the hours until we head into the final quarter of 2026. And you have been on the floor for many years over in Chicago. So I know that seasonality does play a part when we are looking ahead to the final quarter of the year. So what is your outlook as we head into the final months of this year, especially given the fact that it is a midterm election year.
It is. And, you know, I think one of the things that I've always seen is that, you know, you have a market that's still not far off its all time highs. And one of the things that I've seen throughout my career is when people are, you know, have this FOMO type attitude, I have to be involved. The market can continue.
It will often go down when everyone's like, oh my God, I'm long. I'm so nervous. When you know many retail traders and talking to people here that as soon as they buy the trade, they're like, I can't wait to get out of it. And so with that, a nervousness in the market is actually what keeps the market going higher overall.
And so I think that that is really what I see right now. Again, the midterms I you know, yes sometimes people miss them. But I think overall there is a sense that we will get a split, uh, Congress, which is fine. And actually the markets often like split Congresses and tend to perform better over time with that.
And so as we head to the end of the year, I think that all the uncertainty will probably continue through the end of the year. And so I think you'll see a VIX that trades mostly between 14 and 20 for the end of the year, with the occasional news out of Iran which will spike it. But other than that, you know, you talked about the probabilities of a rate hike not being quite as high right now.
And I think without a spike in gasoline prices, etc., we probably will see us flat on that through the end of the year.
Well, JJ, so many moving parts. Here are so many things to keep our eyes on, so I appreciate you taking time out of your busy schedule this morning to hear us from the Hood Summit. Thank you so much. Great to see you JJ. Have a great day.
