Easing Bond Selloff Lifts U.S. Stock Futures

0:00Harvard Business School Executive Education delivers a world-class learning experience that energizes aspiring and established change makers. Prepare for the next elevation for your organization and for yourself. Learn more at hbs.me-slashbreakthrough. That's hbs.me-slashbreakthrough. Relief in bond markets, following a record week for yields, plus Iran offers to reopen the Strait of Hormuz within a week, yet a deal to end the war seems far away. So Trump wants to continue the conversation because that means he ran his own attack key during the midterms, but he's showing no sign of compromise. And cracks begin to show in Oracle's massive AI data center build-out. It's Friday, September 25th. I'm Luke Vargas for the Wall Street Journal, and here is the AM edition of What's News, the Top Headlines and Business Stories, moving your world today. A global bond sell-off is steadying this morning, giving US stock futures some relief ahead of the open.

1:01Helping drive those moves is a retreat in oil prices, following reports yesterday that US and Iranian negotiators in New York are discussing a deal to reopen the Strait of Hormuz. And joining us now to break down how investors are processing a busy week of geopolitical events. I'm joined by markets reporter Caitlin McCabe. Caitlin, tell us more about the mood today because to be fair, we weren't led to believe there was going to be any major breakthroughs this week, either on Iran at the UN General Assembly, or regarding the US-China relationship coming out of the Xi Trump Summit. And yet, in many ways, it seems it's been so quiet that bigger narratives around borrowing costs, around central bank decisions are the ones that have sort of remained the primary storylines here, in spite of all the pomp and circumstance we've seen in New York and Washington. Is that fair? Yeah, definitely. The mood and markets is actually fairly quiet today, all things considered, given that it's been such a wild week. But you're definitely correct that markets haven't been paying that much attention to that pageantry that we saw in New York and Washington.

2:01And I think there are a few reasons for that. You know, for one, as we reported, the summit yesterday between Trump and Xi Jinping was pretty heavy on ceremony and light on outcomes. The two sides did agree to a modest two-month extension to the trade detente that currently exists. But there are still a ton of issues left to be resolved on everything from rare earths to agricultural purchases to AI. Markets, on the other hand, have been focused on a lot of other signals. Trader still remained concerned about elevated energy prices, feeding through to inflation, which will likely prompt the Fed to keep raising rates. And that seems especially true after we had some strong economic data this week that really showed us that the U.S. economy remains quite resilient, which suggests that the economy can handle higher rates and rate increases. I'm glad you brought up oil because it seems as if we may be seeing a bit of profit taking here. And I say that because the underlying price-pressor and energy really doesn't seem to have gone

3:03away far from it. Yeah, I mean, I think that's pretty typical to what we've seen with oil prices really throughout this war. You have days where oil is up. You have days where oil is down. And it's really headlined driven. So yesterday we had news reports that Iranian and U.S. negotiators were trying to hash out some sort of phase deal that would see Tyron reopen the straight up for moves in exchange for Washington lifting its blockade. And so that's one big reason that we're seeing oil lower today. But we could very well wake up again next week and oils up again. The reality is that the backdrop remains pretty unchanged. There are very real and legitimate concerns about oil supply and inventory. We had a report from the International Energy Agency recently that said oil inventories have fallen by 507 million barrels since the conflict began. And that's important to know because it leaves a smaller buffer in case we have any further supply shocks and supply disruptions. I'm very excited to say, Kaelin, this is your last appearance with us.

4:04Thank you so much as always and thanks especially for filling in for me last year. We're going to miss having you on the pod. I'm going to miss it as well. Thanks, Luke. Well, speaking of the situation in the Middle East, as Kaelin mentioned there, a concerted push is underway for fresh talks after Iran offered to reopen the straight of horror moves and restart nuclear negotiations. But his correspondent Benoit Fokhan told us, neither the US nor its regional allies are particularly incentivized to make a deal. So we are in a standoff and a very tense one actually and is true the chances of success of diplomacy women fairly thin. On paper and officially there is hope, the Iranians have proposed a seven day lull where there would be no attacks with the idea that they would reopen almost but also with the US lifting his blockade. And both sides say they want to talk, except they will not on the same page. The Iranians and the US blockade is really crippling every single avenue of trading for them and Trump knows that.

5:05On the other hand, it's got a vested interest not to have a military escalation because we have mid-term selections and especially not to have the Iranians thinking they are so cornered they now need to attack the US or US bases. So we also need to keep diplomacy alive, even though at the moment it's not ready to compromise on it. Costco is reporting rising sales and higher profit, pointing to healthy spending from consumers undeterred by inflation alongside a record year for its gas business as the war in Iran boosts its value prop. The UFO Gary Miller chip said that younger shoppers are also signing on as Costco members driven by both new investments into the company's app and the brand's older school warehouse vibe. They're really engaging and excited about experiences and the opportunity that Costco presents to be in a brick and mortar retail environment and to enjoy the treasure and experience and engaging whether it's the food court or the non-food items that we call the Costco says that more than a quarter of its member base is now under age 40.

6:09And cracks are beginning to show in Oracle's massive AI data center build out in New Mexico. Dubbed Project Jupiter, it's part of a blitz of deals to create computing power for open AI. But we report that the facility is facing local resistance. Oracle has booted one of its key land and power partners from the project and this week sent a force-major notice to a developer to push back the data needs to start paying rent. We also report that lenders are showing signs of unease about their exposure to Oracle with at least one bank that arranged loans for the New Mexico project selling off a portion of the debt. Oracle's project lease was made with so-called hell or high water terms, meaning it can't be terminated and Oracle is obligated to make rent payments regardless of whether it's secured power to operate the data centers. The spokesman said that Project Jupiter remains on our planned schedule, adding that Oracle is fully committed to New Mexico and confident in our path forward. Oracle stock is down roughly 40 percent year to date.

7:13Coming up the US government hits the airwaves with an apparently taxpayer-funded pro-Trump TV spot. That plus the rest of the day's news after the break. Harvard Business School Executive Education delivers breakthrough learning for leaders. Stimulating classes led by faculty at the forefront of their fields, topics that will define the future of business, discussions that transform perspectives and ways of thinking, and access to the brightest business minds on the planet. For more at hbs.me-sla-breakthrough, that's hbs.me-sla-breakthrough. It's the onset of flu season, and unlike previous years, this one isn't being accompanied by a federal recommendation to get a flu shot. Journal National Politics reporter Sabrina Sadekie covers health policy and says the change comes as data shows that the flu killed more US children last year than it has in recent

8:18years. This is the first flu season in which the US government is not issuing a new universal call for Americans to get their flu shots. The reporting shows that there could be a lot of other factors that are driving flu deaths upward, but what has held consistent for many, many years now, according to CDC data, is that the majority of flu related deaths in children occur among those who are not fully vaccinated. Instead of issuing a blanket recommendation for children to get the shot, the Trump administration instead wants parents to make a decision along with their physicians. What people are going to see is that there's going to be this disconnect between what the federal government is saying and what their doctors are saying. So pulling back to the recommendations is not at this point in time, changing people's access to the vaccine, but it's certainly mudding the waters and confusing people about whether or not they actually need to get the vaccine. It's worth pointing out that a number of physician groups are continuing to recommend universal

9:20flu shots for children, as well as encouraging people to get their COVID shots and other vaccines. While the flu is on the rise, COVID-19 cases are also growing in as many as 27 states, according to recent data from the CDC. The Trump administration has asked the Supreme Court to review a lower court ruling that halted deportations of people to countries other than their own. The administration said the ruling by the first US Circuit Court of Appeals came on Wednesday shortly before midnight, forcing the cancellation of a flight with 70 people aboard that were headed to three countries. The lower court order doesn't completely prohibit third country deportations, but it requires the government to give people a meaningful chance to object. The majority of people deported to countries other than their own have been sent to Mexico,

10:22but the administration has also deported thousands of others to more than two dozen countries under a series of often secret agreements. New Jersey Governor Mikey Sherrell is calling for Lieutenant Governor Dale Caldwell to resign. After an independent investigation, found that he made a sexual comment to a staffer and tried to get a promotion for a romantic partner. Sherrell has hired former New Jersey Attorney General Chris Perino to lead the probe, which was prompted by an anonymous letter sent in May. She said that the investigation found that Caldwell repeatedly violated state policy and attorney for Caldwell strongly disputed the investigation's findings. And as the leader of the world's largest communist country receives the red carpet treatment in Washington, a new pro-Trump TV ad denouncing communism has hit the airwaves. Together we will defeat communism, socialism and Marxism and America. America will never be a communist country. The campaign style spots as it was paid for by the US government and appears to have first

11:25aired on Fox News on Wednesday ahead of Xi Jinping's summit with Trump. White House official disputed that the ad was political and referred to it as a public service announcement. However, ethics experts said the administration's decision to fund an advertisement that appears to include a voice clip from the Republican National Convention could violate federal law. The ad has aired more than a dozen times nationally, according to ad tracking firm Icebot. Fox News parent Fox Corp and Wall Street Journal parent news corp share common ownership. And finally, while workers across the job market battle fears about being displaced by AI, Journal Legal Affairs reporter Aaron Mulvaney says that law firms are facing a very different challenge. Senior partners at elite firms aren't retiring. On one hand, senior partners hold tight to their key relationships and origination credits which is what their compensation is based on. And that can lead little incentive to either hand over those accounts or make way for the

12:29next generation. They also occupy a limited number of equity partner slots. So there's just less profit share to either promote rising stars or recruit lateral talent. Aaron says the problem of getting aging lawyers to retire is an old one. It's not unusual to see some working well into their 80s or even 90s. While some firms have mandatory retirement ages or shift equity among partners if work is winding down, others have found a new work around. There's a few firms I found out are hiring retirement consultants that are actually helping their senior partners think about what their life would look like outside of law, acknowledging that the identity of a lawyer is really what they've held on to for all these years. And maybe they haven't really even conceived of retiring because they don't know what else they would do. And there are these kind of positive programs that are proactively training lawyers to think about those things. Aaron told us that lawyers working with retirement consultants have taken some left turns as

13:30screenwriters or volunteer paramedics or even opening wedding venues and wineries. Pretty good, huh? And that's it for what's news for this Friday morning. Today's show was produced by Daniel Bach and Hadi Moyer, our supervising producer, his Sandra Killhoff, and I'm Luke Vargas for the Wall Street Journal. We'll be back tonight with a new show. Otherwise, have a great weekend. Thanks for listening. Your most valuable data isn't in a database. It is sitting in your enterprise documents, images, and records invisible to most AI models. I'm Jatesh Guy, CEO of Highland. When AI pilots struggle to scale, the model usually isn't the problem. The context AI needs is fragmented, but you don't have to move it all first. Content intelligence and automation creates governed context right where your data already lives. So AI knows how to take action. Turn your content into outcomes. Learn more at Highland.com.