Good morning. This is Reiji Kamiya.
Today, let’s look at **’What you need to know this morning’ + ‘one investment tip’** together.
In yesterday’s morning paper, we saw the trend of
strong economy
↓
caution over rate hikes
↓
rising interest rates
↓
headwinds for stocks
.
And last night, another major factor was added.
That is the rise in crude oil prices.
Due to caution over the situation in the Middle East, Brent crude oil rose to nearly $107 per barrel at one point.
Interest rates also rose, and US stocks had a heavy session.
Today, let’s organize why rising crude oil prices become a burden on stocks.
☕ That’s all for this morning!
The US market last night was mostly flat.
NY Dow -0.32%
S&P 500 -0.03%
NASDAQ +0.01%
NASDAQ rose slightly, but overall it was a day lacking direction.
What the market was wary of was the flow of
Middle East situation
↓
higher crude oil prices
↓
inflation
↓
rising interest rates
.
This morning, it is enough to just remember that ‘when crude oil rises, it also affects interest rates’.
🛢 Why did crude oil rise to nearly $107?
Last night, supply concerns in the Middle East were once again on the radar. Brent crude rose more than 3% to nearly $107.
Following missile attacks on Saudi Arabia, concerns intensified that ‘crude oil supply might be disrupted’.
Crude oil is not just about gasoline. It affects various costs such as transportation, manufacturing, electricity, and logistics.
In other words, it leads to the flow of
higher crude oil prices
↓
rising corporate costs
↓
prices are also hard to lower
.
🎓 One investment tip to learn today
Why do interest rates rise when crude oil prices go up?
Here is today’s key point.
When crude oil prices rise, gasoline costs and transportation expenses tend to increase.
As a result,
prices become harder to lower
↓
inflation might persist
↓
the Fed might keep interest rates high
is what the market thinks.
In fact, US Treasury yields rose last night, with the 30-year Treasury yield climbing to its highest level since 2004.
In other words, crude oil and interest rates are not separate news items.
📉 Why do stocks struggle when interest rates rise?
We have seen this many times in the morning paper.
When interest rates rise,
the yields on assets like government bonds increase
↓
the appeal of assets safer than stocks grows
is one aspect.
Furthermore, for companies, there is the burden of increased borrowing costs.
Therefore, this tends to be a headwind, especially for high-tech and growth stocks.
Last night, AI-related stocks were mixed; Microsoft and Broadcom fell, while AMD and Meta rose.
In short, “interest rates rose” does not mean “all stocks will fall.” But it is a heavy factor for the market as a whole.
💡 The reason stocks recovered midway
Last night, there was a moment when US stocks fell much further.
However, after Reuters reported that US and Iranian negotiators were considering a phased agreement that could include the reopening of the Strait of Hormuz, the S&P 500 and NASDAQ narrowed their losses.
This is also important.
The market is not just about
worsening Middle East tensions → higher crude oil → lower stocks
.
When new news comes out, supply concerns might ease → crude oil might stabilize → stocks recover, and the outlook changes immediately.
The market is always moving ahead, anticipating the next piece of information.
🧭 What should we watch starting today?
There are three points today.
1. Crude oil prices
Will they rise further from around $107, or will they fall due to expectations of easing Middle East tensions?
2. US Treasury yields
Will interest rates continue to rise in response to higher crude oil prices?
3. The next FOMC
In the market, the probability of an additional rate hike in October has risen to about 70%.
Furthermore, New York Fed President Williams indicated that it is reasonable to consider the possibility of one more rate hike within the year.
Right now, if you look at it in the order of
crude oil
→
inflation
→
interest rates
→
stock prices
it is easier to connect the news.
📌 A quick note
Just this week, we saw strong economic data leading to rising interest rates.
And today, we arrived at the same “interest rates” from a different entry point: rising crude oil leading to inflation concerns, which then leads to rising interest rates.
You don’t need to memorize all investment news.
First, try thinking, “How does this news connect to interest rates?”
Just by doing that, stock price movements will become much easier to read.
Today’s lesson is that crude oil, interest rates, and stocks are not separate, but connected.
That is the key.
Have a great day today.
Reiji Kamiya Along Note
※ This article is intended to provide information for learning about investing and does not recommend the buying or selling of any specific financial products.
📚 I will be compiling my morning papers into a magazine.
If you would like to read them all together, please take a look.
📒 I have opened an Along Note on a separate account. Please check it out!
I will do my best to show you the process of creating a product that sells. I will also not hide my failures, but instead analyze and disclose the parts that didn’t work. Your support is appreciated. 🙇
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