The Fed is raising the price of money to fix what is largely a shortage of refining capacity, and this afternoon we get the minutes explaining why. Good morning and welcome to today's market chronicle. It's Wednesday, October 7, 2026.
Yesterday's close was another record, the S&P up about seven tenths of a percent, Nvidia (NVDA) nearing six trillion dollars of market value and Advanced Micro Devices (AMD) at an all time peak after Lisa Su said demand for compute keeps outrunning supply. She has said that for two years and been right for two years. The ten year eased about five basis points off its highest level since 2002, and that was apparently enough.
What nobody wants to price sits underneath the oil price: the barrel is not the problem, the refinery is. The diesel crack spread set a record above a hundred dollars a barrel last month, distillate stocks sit thirteen percent below their five year average, pump diesel has crossed six dollars a gallon, and Goldman expects cracks at twice normal through 2027. Diesel is freight, farming, construction, and, inconveniently for the story equities tell themselves, the excavators and generators that build a data center. You can take the cost of money to four percent and the distillate yield of a Gulf Coast refinery will not move. I would like someone at two o'clock to say that out loud.
I spent August arguing with a colleague here in Geneva that the Hormuz premium would decay by September, on the theory that infrastructure always finds a way round. The way round was a pipeline finished in 1981, twelve hundred kilometres to Yanbu, capacity seven million barrels a day, running about two million in August and nearly six million now, according to the Saudi energy minister. Petroline was sized for a short disruption. February was a short disruption. I was right about the pipeline and wrong about the premium, which is the most expensive way to be half correct.
Ahead today, the September minutes at two, from the meeting where twelve people voted unanimously for the first hike since 2023, written before the payroll print landed at twenty nine thousand. So we will read three week old reasoning about an economy that has since stopped hiring. There is also a thirty nine billion dollar ten year auction, the only honest price discovery of the day.
On the book, no single trade is worth the paragraph today, which is itself worth saying. The Mosaic Mid-Horizon sleeve is up about four tenths of a percent over the last twenty sessions, against about one and seven tenths for the SPDR S&P 500 ETF ($SPY) on a total return basis, measured to yesterday's close. Trailing by a bit more than a point across a month in which the index kept printing records. The sleeve is built to do that, which does not make it pleasant to read.
Levels. Gold 4,134.68 an ounce, Brent 101.24, Bitcoin near 83,800, S&P futures 7,875.00 and barely awake, the ten year 5.27 percent. Bitcoin has held the same narrow band since July, which for Bitcoin counts as a personality change.
The market has decided energy inflation is a supply story and therefore temporary. Supply stories are temporary. February was eight months ago.
Have a good one.
Salomon