Welcome to the final day of September and Q3. Last night in a throwback to my college years, Rice and Schlitts were on the dinner menu as the Yankees blasted and silenced the Red Sox in Game 1 of their post-season matchup. While the MLB Playoffs got underway yesterday US equities with modest losses despite crude pulling back. 2y yields fell but the long-end continued to march higher. Utilities led and Comm Services, Industrials and Consumer Discretionary were the other sectors in the green. The fall in oil pushed Energy to back of the pack. Large caps were mixed, with the tech mega caps were mostly lower AAPL (-3%). Semi/memory stocks were among the leaders, especially the capital-equipment stocks. Anthopic’s IPO/S-1 details leaked, with lots of huge numbers in it for both revenue and spending. Also, a “destruction of humanity” note in the risk factors. Open AI had its Dev Day, which included the unveiling of “Dots” their personal AI agent response to Meta’s Muse. There was also the tech summit at the White House where AI was officially rebranded as SI, not to be confused with Sport Illustrated or just a regular old sigh, but rather Super Intelligence. Consumer Confidence was weaker than expected as were the JOLTS job openings, though CCL and KMX earnings showed consumer resiliency. Late in the day NY Fed Williams made some dovish comments saying after the September hike “there is no need for urgency” and that the Federal Reserve can now look at the data before making further decisions. He went on to say that if his projections are correct, one further hike later this year would be appropriate. This helped 2yr yields fall and helped equities stabilize in the back half of the day.

S&P futures were trading around flat before this morning’s economic data hit the tape. PCE was the main focus with this month’s reading incorporating the BLS methodology changes. Headline and Core PCE (+0.2% m.m vs 0.3%) were cooler than expected but ticked up last month’s downwardly revised numbers. On an annual basis headlines and Core (3% vs. 3.3%) were also better than expected. A couple economists have suggested that that methodology changes across computer software, legal fees and investment advice, accounted for a ~0.35% downward adjustment to the reading. Personal Income was lower than expected while Spending was a touch higher, continuing to suggest savings rates are being drawn down. The 3rd GDP estimate was revised higher, from 1.5% to 2.2% driven by increases in consumer spending and Investments. The September ADP Jobs report was better than expected increasing to 90k from 38k last month. Initially the 2yr yield fell ~6bps but that has since reversed. The odds of a Fed rate hike in October have eased over the past two days to ~40% from ~70% a week ago. That being said, long end of Treasury yields are up ~bps hitting new YTD highs. There are multiple Fed speakers on the calendar today. On a separate note the Fed’s Office of Inspector General found no criminal misconduct in the Fed renovation, potentially opening the door for Chair Powell to step down from the Board which would open up a new seat. If you’re looking for a fascinating afternoon read there is a much juicier story about Chinese espionage and the Fed released by CNBC’s Eamon Javers.