Rekt Mkts: Market holds up despite initial weakness

Despite the initial drop yesterday we are decently off the lows which feeds into my view that the pain trade for markets is higher. Not expecting a huge amount of movement today ahead of tomorrow's rate decision and FOMC presser.

WTI futures are around $103.60, up roughly 2.1%, while Brent was above $107 this morning...not great as Saudi Arabia's East-West pipeline remains shut, and Monday brought fresh Houthi attacks on Saudi Arabia. Satellite images published yday showed damage to the pipeline's pumping infrastructure. This is the route that lets Saudi exports bypass Hormuz, so the alternative is getting hit too. How long repairs take matters for how much oil can get out. Gold futures are down about 0.9% near $4,312. The 10Y has pushed above 5% today, marking the highest yields since 2007. As discussed yday, the Fed decision is tomorrow and a quarter-point hike is heavily priced (now 92% odds on CME FedWatch). The backend is already lifting borrowing costs before the Fed acts...tomorrow is about how much more tightening follows, as well as the first move. The BOJ is also potentially expected to hike on Friday.

The chip selling reached the US properly yday. MU and SNDK lost about 5%, Nvidia 3.4%, and the chip index nearly 6%, against the S&P down roughly 0.5%, though it's worth noting we did close a decent amount off the lows. Trump pushed back on Monday, saying the US already has the safeguards it needs and that doubts over AI development would benefit China. So the administration is pushing to keep building while the labs are asking to slow down. Calls to slow model development still aren't the same as cancelled chip orders or data-centre projects, nonetheless it did dampen the move a little. Software actually went the other way: ServiceNow, Adobe and Workday gained between 4% and 7.4% after previously selling off on fears of AI competition. Quite a different reaction depending on which side of AI spending you're exposed to. Hynix and Samsung finished only slightly lower in Korea today, while Kioxia gained about 2.3% in Japan. Less ugly for memory in Asia, altho not a recovery across the board.

Majors are softer this morning, with BTC, ETH and SOL all lower despite some strength yesterday. Re Clairty - there is a fresh negotiating step: Democrats allegedly sent Republicans a counteroffer late Monday. So the Republican draft being described as final hasn't ended the bargaining. Today's hurdle needs 60 votes to move the bill towards debate, not make it law...but a positive outcome would be a big tailwind for crypto prices I think. Atm my view is that markets are pricing in a negative outcome, with Polymarket odds of Clarity itself passing in 2026 dropping back to 15%...consequently I favour a long trade in majors as I think the risk/reward is skewed to the upside in case of a positive surprise. Good luck today.