1008 | Oil, Yields, and the AI Shock: Markets Under Pressure

Mia: Welcome to the after-market briefing. I'm Mia.

Milo: And I'm Milo. It's Thursday, the tape is closed, and we've got a session where oil, yields, and an AI revenue headline all pushed on stocks at once — so today is really about markets under pressure from three directions, and what that means for the closing tape.

Mia: Let's start with the one doing the most damage: oil. Brent crude topped $105 a barrel, and that's not coming out of nowhere. Iran has stepped up tanker attacks, and there's also a hurricane threatening U.S. Gulf production — two supply risks hitting at the same time. Reports say President Trump and his national security team have talked about possibly restarting large-scale U.S. military operations in Iran.

Milo: The ripple effect was immediate. Higher energy costs sent stocks lower and whipsawed bonds, with the worry being that pricier oil feeds inflation and forces the Federal Reserve to boost rates rather than cut. On the policy side, the Treasury sanctioned 17 tankers linked to Iran's so-called shadow fleet as part of the administration's economic pressure campaign on Tehran.

Mia: Now, there's a tension in the messaging worth flagging. Trump said the U.S. will not attack Iran before the midterm election, and he described talks with Tehran as productive. But that comes alongside the war pushing oil and gas prices higher and support for the conflict falling.

Milo: And it's not just the administration's line. Mark Esper, who was defense secretary during Trump's first term, said he sees no end in sight for the war — to the benefit, in his words, of America's greatest adversary. So the reported facts are: oil above $105, tanker attacks, a Gulf hurricane threat, sanctions on 17 tankers, and a presidential commitment not to strike before the election. The unknown — and it's a big one — is whether those large-scale military operations actually restart.

Milo: That's the tail risk hanging over energy prices.

Mia: Which feeds directly into our next segment, because that oil move is one reason Treasury yields were making headlines today. The 10-year and 30-year have marched to 24-year highs in recent days. David Zervos, a new adviser to Treasury Secretary Bessent, called those levels "really, really high" but argued they can come down soon.

Milo: And today there was some evidence for that view. Treasuries rose after a 30-year auction drew solid demand, pulling long-dated yields away from their highest levels in more than two decades. Traders also digested comments from a top Fed official while watching the long end. So yields were lower by the close after touching multiyear highs.

Mia: The options market even got bold. A handful of options traders started calling a bottom on the bond rout after what they described as a "bullet bid" 10-year auction. I want to be careful here — that's interpretation, not fact. Calling a bottom in a relentless sell-off is a bet, and we don't yet know whether the yield rally has truly ended.

Milo: On positioning, BlackRock's Rick Rieder, who runs global fixed income, said the front end of the yield curve is "still very attractive" — his framing is that it keeps your volatility down and your income high. He also discussed why he's positioned for a hawkish Fed, which is consistent with the inflation worry the oil spike is creating. So the watch item here is the auction calendar and whether demand at long-dated sales keeps holding up.

Mia: From yields to the equity story that dominated tech: OpenAI told investors it hit roughly $50 billion in annualized revenue at the end of September — a figure CNBC confirmed — but it disappointed expectations, and that deepened bubble fears.

Milo: The reaction was sharp. Nvidia, Oracle, CoreWeave and other AI-linked stocks sank, and the biggest technology leaders dragged down the broader U.S. equity benchmarks. So this wasn't a niche move — it was a headline contributor to the index declines on a day when stocks were already fighting higher oil and higher rates.

Mia: Ray Dalio added to the caution, warning that the stock market's cushion against rising bond yields is shrinking. His argument is that strong earnings have buffered stocks from higher yields, but that buffer is weakening as free cash flow could turn down. That's a warning, not a forecast of an imminent decline, but it ties the yield story and the AI story together neatly.

Milo: For balance, Goldman Sachs Wealth Management's Matt Weir pushed back a bit. He says the recent concentration of gains in a handful of large tech stocks doesn't signal the end of the bull market. He expects hyperscaler capital-spending growth to decelerate from its extraordinary pace but stay well above overall economic growth, and he argues earnings will ultimately determine where stocks go next. So: reported fact — the $50 billion annualized figure and the stock declines.

Milo: Interpretation — bubble fears on one side, room-to-run on the other.

Mia: One more overlay for AI investors: with the final month of the midterm campaign kicking into gear, AI regulation is emerging as a chief point of focus for equity investors, along with government healthcare and defense spending. So AI darlings carry a policy risk into the election, not just a valuation one.

Milo: Let's move to individual names and earnings, where the consumer side had real news today. Starbucks — new data shows its turnaround is working. But the bigger jolt was Chipotle: shares were slammed on a report that Starbucks has been working with advisers on a takeover proposal.

Mia: And that deal isn't clean-cut. There are pros and cons for investors on both sides — Starbucks taking on a fast-casual chain while it's mid-turnaround raises questions, even if the strategic logic is there. For Chipotle holders, the report itself was the catalyst; nothing has been agreed. That's the material uncertainty — a reported proposal, not a signed deal.

Milo: PepsiCo went the other direction: it cut its earnings forecast, saying the North American turnaround is taking longer than expected. The North American business continues to lag its international markets — that's a guidance reduction, which matters more than any single-day price move.

Mia: Amazon overhauled its aging devices lineup, introducing a higher-priced Alexa tablet — citing improved speed, performance, AI features and upgraded design — and dropping the budget Fire line. That's a mix and pricing shift worth noting for anyone tracking Amazon's hardware strategy.

Milo: One honorable mention from the Investing Club desk: they added to their position in a hard-hit stock ahead of important catalysts — their second purchase on Thursday. We don't have the specific name in what we're covering tonight, but it's an example of investors leaning into weakness with catalysts ahead rather than a market-wide signal.

Mia: Now let's shift to credit and big money, because stress shows up in bonds before it shows up in headlines. JetBlue's bonds fell to their lowest levels since they were issued more than two years ago, falling deeper into distress. The airline is burning through cash, and short-sellers are piling into its shares. Both legs — debt and equity — are under pressure at once, which is a notable signal.

Milo: On the other end of the spectrum, Goldman Sachs is handing out one of the biggest special bonuses in its history. About 20 senior executives are in line for equity awards finalized later this month that exceed $500 million at the current share price, with CEO David Solomon in line for more than $100 million. So in the same session: a distressed airline's debt at record lows and a record-scale payout at a bank riding good times. Different corners of the market, very different cycles.

Mia: And a disclosure note: Trump reported 517 August trades, including up to $25 million in Meta and up to $5 million in debt from SpaceX — which is a major Pentagon contractor and NASA launch provider. That's a disclosure, not a market move, but it's a fact on the tape.

Milo: Politics and prediction markets next, and this connects to the oil story, because election timing is what's anchoring some of the geopolitical uncertainty. On Kalshi, traders expect gas prices to stay above $4 per gallon on November 3rd — Election Day-adjacent — so little relief is expected at the pump.

Mia: And Kalshi itself is at the center of a legal fight. The NFL urged the Supreme Court to let states regulate prediction markets, filing an amicus brief supporting New Jersey regulators in their battle against Kalshi. The league's argument is that sports prediction contracts are effectively gambling and should be regulated by the states. That puts the NFL at odds with the Trump administration in a high-stakes clash.

Mia: Watch the Supreme Court's handling of that question — it affects the whole prediction-market business model.

Milo: On the money side of the midterms, a CNBC analysis found Republican megadonors dominating 2026 spending — 14 of the 20 biggest donor groups analyzed are Republican-aligned — with crypto, AI, and betting money reshaping the landscape. Separately, the Trump administration said changes to Trump Accounts could open the door for several multimillion-dollar donations, with the program now topping 70 million accounts.

Milo: So the midterm cycle isn't just about policy risk — the funding flows behind it are shifting.

Mia: Let's bring in the macro data, because it explains part of the Fed picture we touched on. The New York Fed found that tariffs added 2.9 percentage points to inflation in 67 categories of goods by February 2026 — their finding, quite strikingly, was that inflation on many everyday items was entirely due to tariffs.

Milo: And the labor market, at least at the claims level, looks firm: initial jobless claims eased by 2,000 to 197,000 for the week ending October 3rd — the lowest since July, and the fourth straight week below 200,000. Firm labor data plus tariff-driven inflation is exactly the combination that supports Rieder's hawkish-Fed positioning we mentioned earlier.

Mia: Abroad, the worry spot is France. The premium investors demand to hold French debt has soared in recent weeks, stirring memories of the European sovereign debt crisis. French Finance Minister Roland Lescure pushed back, saying the bond market is working properly and France doesn't need a "hand of god" intervention.

Mia: That's his characterization — markets clearly disagree that everything is calm, which is why attention is turning to whether the ECB might respond, and specifically to a tool called the TPI, the transmission protection instrument, which is the ECB's anti-fragmentation mechanism. We don't know if or when it would be used; that's the open question.

Milo: Deal flow and market quirks — several items here. Belron, the windshield repair group, has selected investment banks to lead a potential IPO that could be Europe's largest in years. Oryx Energies, an Africa-focused trader, was sold for around $1 billion in a management buyout. And Carlyle said its agreement to buy most of Lukoil's foreign assets has terminated — a deal death, worth noting given the Russia-related sanctions environment we discussed earlier.

Mia: On the quirkier side: hundreds of professional sports team ETFs are emerging, letting investors bet on MLB and NHL team performance — and experts say these look more like gambling than investing, which is a familiar theme given the prediction-market fight we just covered. In a similar spirit, Corgi has launched hundreds of ETFs in less than a year using AI — its chief investment strategist talked about how AI and puppies are being used to upend the ETF business.

Milo: A couple of quick fund-manager stories: Brazilian hedge funds that positioned well for right-wing candidate Flávio Bolsonaro's strong first-round showing in the presidential election are fine-tuning derivatives bets that soared on Monday's historic rally in local markets — they're betting on more gains ahead. And in the UK, the owner of Market Financial Solutions says he's been harassed by lawsuits as creditors try to recover about £2.

Milo: 3 billion — roughly $3 billion — of loans extended to the property company, which collapsed amid allegations of widespread fraud.

Mia: Finally, the briefs — media, space, and the rest of the world. Skydance's David Ellison told CNBC the combined company — which includes two film studios, the CBS broadcast network, a sprawling pay TV portfolio, and the Paramount+ and HBO Max streaming services — is "positioned to win in every single vertical." That's his pitch, note.

Milo: SpaceX's crew capsule splashed down off the coast of California Thursday, capping a mission to the International Space Station with four astronauts aboard.

Mia: In the UK, police arrested two Latvian men on suspicion of trespassing and national security offenses at an airbase used by the US for intelligence work — just weeks after a suspected terror plot at another base housing American bombers.

Milo: In Venezuela, the bolivar weakened past 1,000 per dollar in the parallel market for the first time, as government sales of hard currency decline — a milestone in the currency's slide. And Maduro and his wife face a new criminal charge that they're responsible for the alleged torture of US citizens detained in custody.

Mia: One trade-policy item: Britain faces a finely balanced choice on whether to follow the EU in imposing tariffs on Chinese EVs — the US shut them out, Britain welcomed them, and now the choice is difficult.

Milo: Two closing items on the industry side. Bloomberg's Odd Lots explored European productivity: research suggests fewer hours worked actually lead to an increase in productivity, so Europe working less isn't why it may be falling behind. And CNBC released its Financial Advisor 100 ranking for 2026 — top of the list is Howland Capital Management, which takes a family-office approach, with the firm noting there's real value in all of those client relationships.

Mia: So to pull the session together: oil above $105 on Iran and Gulf supply risk, stocks lower, bonds whipsawed; Treasury yields off 24-year highs after solid auction demand; AI stocks sank on OpenAI's $50 billion annualized revenue disappointment; Chipotle slammed on a reported Starbucks takeover push, PepsiCo cut guidance; JetBlue's debt deeper into distress.

Milo: What we're watching tomorrow: any sign of renewed U.S. military action or de-escalation with Iran, the follow-through on Treasury auctions, further reaction in AI-linked names, and whether Chipotle confirms or denies anything on the takeover report. Thanks for listening — we'll be back with the next briefing.

Mia: See you then.