Markets and the oil-yield link
The inverse link between crude oil futures, the 10-year Treasury yield, and stocks keeps holding. Crude oil has moved lower over the last couple of days even with all the headlines about Treasury Secretary Scott Bessent, Iran, and wider sanctions. Stocks that struggled the prior day - chips and semiconductors were sold - saw a modest rally, with crude oil now down 3.2% on the day. That is a solid selloff in crude and a solid rally in futures: the NASDAQ up about three-quarters of a percent and the E-minis up roughly three-eighths of a percent. Lower yields plus lower crude prices make a good start to the day.
Crude is down 5.1% for the week, and it is only Tuesday. Year to date, crude is up 43%.
Sanctions strategy on Iran
Scott Bessent used tough words, describing "operation economic outcasts" aimed not only at Iran but at its trade partners and enablers, who could face sanctions. Something on a financial institution may come Friday.
The U.S. is hitting Iran in the wallet instead of dropping bombs - going after its ability to do business, stopping all ships in the Strait of Hormuz, and talking to China and the UAE. Most of Iran's oil goes to China, so that relationship will work itself out over time. Iran is talking about retaliation in real time and calling this an act of war, and the rhetoric is strong. There is still discussion between the U.S. and Canada. Crude oil futures are the final judge of what is happening, and they are lower, which suggests the U.S. strategy to ease oil prices is working.
China stays a watch point: firms there could lose access to the dollar under stiff sanctions, and China buys a lot of Iranian oil.
For traders who like it simple: lower crude and a lower 10-year yield mean stocks firm up.
Housing data
Case-Shiller 20-city month-over-month came in up 0.2%, a tenth better than expected. The 20-city unadjusted month-over-month was up 0.4%, a miss - the prior month was up 0.9%. The year-over-year figure beat at 2.1%.
The FHFA house price index month-over-month for June was 0.0%, below estimate. The FHFA purchase index quarter-over-quarter for the second quarter was 0.4%, lower than the previous.
The data ahead
Consumer confidence comes at 10 a.m., with a slight drop expected from 90.8 to around 90. New home sales are seen near 620,000. Richmond Fed regional data is also due within the hour.
Wednesday is set to be a massive day: three of the top six monthly economic data points arrive in the morning - durable goods, the second look at GDP, and the PCE inflation data inside personal income and outlays. Nvidia (NVDA) reports earnings after the bell.
Consumer confidence is "soft" sentiment data that many dismiss. The University of Michigan sentiment reading dropped about a week ago, and inflation expectations in it went higher - the opposite of the hard data, which shows the market at all-time highs and inflation coming down. It is hard to trust soft data that points the other way from the hard data.
Consumer spending signal
Dick's Sporting Goods (DKS) was down 15% this morning as same-store sales slowed, raising the question of whether shoppers are still spending.
