An unconfirmed truce, a four-year-old bull and an 11% AI loan

Good morning, Slaters!

President Trump declared an "energy ceasefire" between Russia and Ukraine on Sunday. Moscow hasn't confirmed it. Hours later, Ukraine reported Russian strikes on two power plants.

The oil market split the difference. Crude gave back its whole drop by morning. Diesel stayed lower.

That sets the tone for the week. Announcements are cheap. Markets want proof.

They will get some. The bull market turns four today with the 10-year yield near 5.24%. The big banks report Tuesday, and September CPI lands Wednesday. Together they show whether profits can keep outrunning rates.

Let's get into it.

Crude waited for proof. Diesel took the truce on credit.

Brent settled at $104.72 on Friday. After futures reopened Sunday night, it slid to $102.39, down more than 2%. By 4:45 a.m. Monday it was back near $104.94. U.S. crude made the same trip, from $89.65 back to about $91.92.

Diesel did not make the round trip. Heating oil, the U.S. diesel benchmark, traded near $4.65 a gallon, down about 1.9%. European gasoil was down about 4.6% by mid-morning in London.

The split follows the plumbing. Ukraine's drones have been hitting Russian refineries, and refineries make diesel. A pause would add refined fuel long before it changed crude supply. A White House official said the U.S. deal covers refineries. Kyiv wants power plants and the grid included. Zelensky said Ukraine would agree if Russia did. The Kremlin had confirmed nothing by Monday morning.

Diesel had two other weekend catalysts. Trump said Friday that Russia would supply more than 300,000 metric tons of diesel. That is roughly half a day of U.S. diesel demand. The International Energy Agency also asked members to speed up promised stock releases, diesel first, ahead of its Oct. 15 board meeting.

The market signal?

The diesel discount is a bet that three relief valves open at once. None is locked in. This is Trump's second energy truce in about a month without Moscow's sign-off, and strikes kept coming after the post. If the truce fails in the open, the premium can rebuild fast. Watch for a Kremlin statement on scope, Thursday's IEA decision and Wednesday's CPI.

The bull turns four with rates at the highest level of its life

The bull market that began Oct. 12, 2022, is four years old today. The S&P 500 is up more than 110% over roughly 1,000 trading days. You have to go back to the 2009 to 2020 run to find a longer one.

It is doing something most bull markets don't: climbing alongside long rates. The 10-year Treasury yield sits near 5.24%, after touching levels last seen in 2002 last week. Stocks finished the week higher anyway. Cash bonds are closed today for Columbus Day, so that yield won't update until Tuesday. The VIX was near 15.4 early Monday.

The dollar is telling a different story than rate futures. The dollar index sat near 102.1, just under last week's 18-month high. Speculators held about $36 billion in bullish dollar bets in the week to Oct. 6, CFTC data show, up about $9 billion in a week. Yet futures put the odds of an October hold at about 81%, up from 51% a month ago. The pull looks like Europe's weakness and Gulf risk.

Bitcoin barely noticed any of it. It held near $83,500 through oil's overnight swing. The weaker number was last week's: about $679 million left U.S. spot bitcoin funds.

The market signal?

Earnings have carried this bull through higher rates. Analysts expect S&P 500 third-quarter profits to grow 29.6% from a year earlier, per FactSet. That would be a fourth straight quarter above 25%. That math works only while profits rise faster than discount rates. The weak spot is concentration, since much of that growth comes from the AI buildout. This week shows whether the rest of the market can carry its own weight.

Broadcom's CEO says money might be AI's biggest constraint

Capital "might be the biggest constraint" on the AI buildout, Broadcom (AVGO) CEO Hock Tan said in Singapore on Monday.

Consider the source. Broadcom's sales depend on that spending. When a supplier names funding as the limit, investors should listen.

Seoul sold hard the same day. The Kospi fell 3.65% as foreign investors sold Samsung Electronics and SK hynix, which each lost more than 4%. Yet the won hit a two-year high as local companies sold dollars, a sign the selloff was about memory chips more than Korea. Analysts in Seoul cited the end of buybacks at both chipmakers. China's CXMT also reported progress on memory, and it was Korea's first session since Thursday. Micron (MU) was down about 2% in early premarket trading.

The loan market shows what Tan means. JPMorgan Chase (JPM) is leading a $5 billion loan for Volta Infrastructure, a first-time borrower. It would fund about 36,000 Nvidia (NVDA) chips and back a data-center lease in Norway. The all-in yield is about 11%. Early talk in September put the spread near 5 points. Now it is 6.25 to 6.50 points, at a deeper discount. Two U.S. public pensions have also paused new data-center fund commitments.

The market signal?

Earlier AI chip loans priced cheaper. This one pays up. Borrowers without a blue-chip parent are being asked for double-digit yields, and some allocators are stepping back. That won't stop the buildout, but it favors giants that fund from cash. Amazon (AMZN) is in talks to buy AI startup Decart for about $7 billion, The Wall Street Journal reported, citing people familiar with the matter. Neither company has commented. The next test comes Oct. 14, when Volta loan commitments are due.

The Gulf's risk premium found new places to sit

A drone hit a tanker off Sohar, Oman, over the weekend. Sohar sits outside the Strait of Hormuz. Another tanker was damaged Sunday while crossing the strait itself.

Diplomacy stalled at the same time. Iran called Washington's reply on reopening Hormuz "insufficient." It said it is "no longer in the process of responding."

Strikes claimed by Yemen's Houthis hit Riyadh's main airport two days in a row. Saudi authorities put Saturday's toll at 12 and Sunday's at one. Asked if the U.S. would join Saudi strikes, Trump said: "We may. We're going to look at it."

Goldman Sachs (GS) now puts the risk premium in Brent at a little over $20 a barrel. It raised its December Brent forecast by $5, to $90. That sits about $15 below today's price, which implies much of the premium fades by year-end.

Event traders lean toward Washington staying out. Polymarket's contract on the U.S.-Yemen ceasefire holding through Oct. 31 rose to 80.5 cents overnight. Traders are pricing roughly a one-in-five chance of a U.S. strike on Yemen before November. The market is thin, with well under $100,000 traded on that line. No decision has been announced.

The market signal?

Oil's question is no longer just Hormuz. It is whether attacks keep spreading to anchorages and Saudi airports, which would test September's rebound in Gulf crude exports. No Saudi energy site has been confirmed hit, and a $20 premium already prices a lot of risk. A U.S. call on Houthi targets is the swing factor. Tanker owners and insurers will feel it first.

• Three days to test whether profits still outrun rates
• Tuesday: JPMorgan, Goldman Sachs, Wells Fargo (WFC) and Citigroup (C) report before the open. Analysts expect JPMorgan to earn about $5.93 a share. The lines that matter sit lower in the release: loan-loss provisions, card charge-offs, deposit costs and trading revenue. Cash Treasuries reopen with one session before CPI.
• Wednesday, 8:30 a.m. ET: September CPI. Economists expect core prices to rise 0.2%. Headline is where fuel shows up. On Kalshi, a monthly rise above 0.5% trades near 58 cents, up from 44 cents Friday morning. Bank of America (BAC), Morgan Stanley (MS) and ASML (ASML) report too.
• Thursday: the IEA board meets with diesel stocks on the table. Producer prices and retail sales land at 8:30 a.m. Taiwan Semiconductor (TSM) holds its call. Fed Chair Kevin Warsh speaks from Bangkok late Thursday. Fed officials go quiet on Oct. 17, ahead of the Oct. 27-28 meeting.
• The market signal?
• Each event tests a claim made this morning. The banks show who is paying for 5% rates. CPI shows how much of the fuel shock reached prices. The IEA shows whether diesel relief is real. Hot inflation plus weak credit lines would hit the bull's main support. A soft print with clean bank books would buy it time.

That's it for today's Slate. Monday hands us a truce nobody confirmed, a bull market shrugging off the highest yields of its life and a chip supplier worried about funding. Each asks the market to take something on trust. This week, the banks, CPI and the IEA start sending receipts. Watch what gets confirmed, not what gets announced.

Today's reply prompt: Which story are you trusting least this week: the truce, the earnings forecasts or the AI financing math?