The Fed Isn't Done Hiking 🏦

Welcome back to the Day Trading newsletter 📈

Stocks slipped from record highs Wednesday as the 30-year Treasury yield hit a 24-year high and the Fed signaled more rate hikes are coming, while oil jumped again Thursday on fresh Middle East tanker attacks.

Let’s get into it 👇️ 

🌯 Starbucks has explored a takeover of Chipotle, the Financial Times reported Thursday. Chipotle, worth nearly $39 billion, jumped as much as 8% while Starbucks fell as much as 6%, though both pared their moves. It is unclear whether Starbucks made an offer, and the deal would be the largest restaurant acquisition on record.

🛢️ Oil jumped Thursday after Iran stepped up attacks on tankers near the Strait of Hormuz. Brent crude topped $105 a barrel and U.S. crude rose to about $92.70, each up roughly 5% from Wednesday's close. Gulf Coast producers also began shutting in output ahead of an approaching storm, adding to supply worries.

📉 Webull shares plunged 19% Wednesday after a House committee called the brokerage's China ties a national security risk. The panel said roughly six in ten Webull employees are based in China and urged a federal review. Rival brokerages Robinhood and Interactive Brokers also fell, dropping 2.2% and 3.1%.

📊 Caterpillar fell nearly 6% Wednesday as industrial stocks sold off. Long-term Treasury yields hit two-decade highs, and heavy equipment is usually bought on credit, so higher rates hit demand directly. Deere dropped about 4% and PACCAR slipped 2%.

💰️ SpaceX is seeking to raise $40 billion to buy Nvidia chips, the Financial Times reported Tuesday. The package is about $10 billion in bank loans and $30 billion in investment-grade debt, with Apollo expected to lead and Pimco among the lenders in talks. The deal is expected to close in 2027.

🔼 PepsiCo cut its full-year profit outlook Thursday even as sales grew. Third-quarter net revenue rose 5.6% to $25.3 billion and core earnings per share rose 2% to $2.34. But the company now expects 2026 core EPS growth of just 2.5% to 3.5%, a step down from its earlier forecast.

📈 TSMC's third-quarter revenue jumped 50% from a year earlier to a record NT$1.49 trillion, beating estimates. September sales alone rose 54.6% to NT$511.86 billion (Taiwan dollars) as AI chip demand keeps booming, though the stock still dipped about 1.5% early Thursday. Full quarterly results arrive October 15.

🏦 Wolfspeed received a conditional commitment for up to $1.5 billion in long-term financing from the U.S. Department of War. The 30-year loan would fund domestic silicon carbide and gallium nitride chip work, and the government would get warrants for up to 7.5% of the company. Definitive agreements are not yet signed.

Minutes from the Federal Reserve's September meeting, released Wednesday, showed every policymaker backed the quarter-point rate hike that lifted the Fed's benchmark rate to 3.75%-4.00%.

The bigger news was that most officials said another increase would likely be appropriate by year-end, though the minutes gave no hint on timing.

Almost all participants also said the risks to inflation are tilted to the upside, meaning prices are more likely to run hotter than expected than cooler.

That is a hawkish message, meaning the Fed is leaning toward higher rates to keep inflation in check.

Higher rates make borrowing more expensive for homebuyers, car buyers and companies, and they make safe government bonds more attractive compared with stocks.

The bond market was already flashing the warning: the 10-year Treasury yield, the rate the government pays to borrow for a decade, closed Wednesday around 5.3% after touching 5.35% earlier in the day, its highest level since 2002. The 30-year yield climbed to about 5.7%.

Stocks felt it, with the S&P 500 slipping 0.22% to 7,801.77 a day after a record close and the Dow falling 0.66% to 51,179.87, led lower by industrial companies that depend on borrowing.

What to watch:

• The Fed's next decisions come October 28 and December 9. Traders currently see roughly an 80% chance the Fed holds steady in October, according to CME FedWatch, which would make December the more likely time for another hike if one comes.

• Keep an eye on the 10-year yield: if it keeps climbing, the pressure on richly valued stocks, especially outside of big tech, is likely to grow.

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⚠️ Disclaimer: Not financial advice. Do your research before making any trades.