Stocks Settle Lower on Iran War Anxiety

The S&P 500 Index ($SPX) (SPY) on Tuesday closed down -0.94%, the Dow Jones Industrial Average ($DOWI) (DIA) closed down -0.83%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -1.09%.  March E-mini S&P futures (ESH26) fell -0.94%, and March E-mini Nasdaq futures (NQH26) fell -1.11%.

Stock indexes settled lower on Tuesday with the S&P 500 falling to a 3.25-month low, the Dow Jones Industrial Average dropping to a 2.75-month low, and the Nasdaq 100 sliding to a 3.5-month low. 

Global stock markets retreated, and crude oil prices and bond yields rose on Tuesday as the war in Iran entered its fourth day with no sign of de-escalation, bolstering fears of a prolonged disruption to energy markets and a surge in inflation.

However, crude oil prices fell back from their best levels on Tuesday, and stocks recovered from their worst levels, after President Trump said he ordered the US Development Finance Corporation "to provide, at a very reasonable price, political risk insurance and guarantees for the financial security of all maritime trade, especially energy, traveling through the Gulf."  He also said, "If necessary, the US Navy will begin escorting tankers through the Strait of Hormuz, as soon as possible."  

WTI crude oil (CLJ26) rose more than +4% to an 8.5-month high after an adviser to Iran’s Islamic Revolutionary Guard Corps commander told state TV that “we will set fire to any ship attempting to pass through” the Strait of Hormuz, which runs along Iran's coast and handles a fifth of the world's oil.  The closure of the Strait of Hormuz has forced Iraq, OPEC's second-largest producer, to shut down oil production at its largest oil fields in Rumalia as storage tanks fill up.  Goldman Sachs estimates the real-time risk premium for crude oil at $18/bbl, corresponding to its estimate of the impact of a six-week full halt to tanker traffic in the Strait of Hormuz. 

Also, falling debris from an intercepted Iranian drone caused a major fire at the United Arab Emirates' major oil-trading hub, Fujairah, one of the largest oil storage centers in the Middle East.  European natural gas prices rose more than +22% on Tuesday to a 3-year high after Qatar shut its Ras Laffan plant, the world's largest natural gas export facility, after it was targeted by an Iranian drone attack.   The Ras Laffan plant accounts for about 20% of the global liquefied natural gas supply.

President Trump said Monday that combat operations against Iran could last for weeks until all objectives were completed.  President Trump has called for Iran’s leaders to capitulate, but Iran’s security chief said that it has no intention of negotiating with the US.

Kansas City Fed President Jeff Schmid said, "Inflation has been above the Fed's objective for nearly five years now, so I don't think we have room to be complacent."

NY Fed President John Williams said additional Fed interest rate cuts will be warranted if inflation slows further once most of the impact of tariffs has passed.

This week's market focus will be on US-Iran war news, corporate earnings, and economic news.  On Wednesday, the Feb ADP employment change is expected to increase by +50,000. Also, the Feb ISM services index is expected to slip by -0.3 to 53.5.  In addition, the Fed releases its Beige Book.  On Thursday, weekly initial unemployment claims are expected to increase by +3,000 to 215,000.  Also, Q4 nonfarm productivity is expected to be up +1.8%, and Q4 unit labor costs are expected to be up +2.0%.  On Friday, Feb nonfarm payrolls are expected to increase by +60,000, and the Feb unemployment rate is expected to remain unchanged at 4.3%.  Also, Feb average hourly earnings are expected to increase by +0.3% m/m and +3.7% y/y.  In addition, Feb retail sales are expected to fall -0.3% m/m and Feb retail sales ex-autos are expected to remain unchanged m/m.

Q4 earnings season is nearing its end, with more than 90% of the S&P 500 companies having reported earnings results.  Earnings have been a positive factor for stocks, with 73% of the 481 S&P 500 companies that have reported beating expectations.  According to Bloomberg Intelligence, S&P earnings growth is expected to climb by +8.4% in Q4, marking the tenth consecutive quarter of year-over-year growth.  Excluding the Magnificent Seven megacap technology stocks, Q4 earnings are expected to increase by +4.6%.

The markets are discounting a 2% chance for a -25 bp rate cut at the next policy meeting on March 17-18.

Overseas stock markets settled sharply lower on Tuesday.  The Euro Stoxx 50 fell to a 2-month low and closed down -3.59%.  China’s Shanghai Composite fell from a 10.5-year high and closed down -1.43%.  Japan’s Nikkei Stock 225 dropped to a 3-week low and closed down -3.06%.

Interest Rates

June 10-year T-notes (ZNM6) on Tuesday closed down by -2 ticks.  The 10-year T-note yield rose +1.9 bp to 4.054%.  June T-notes tumbled to a 2-week low on Tuesday, and the 10-year T-note yield jumped to a 2-week high of 4.115%.  Soaring energy prices on Tuesday sparked inflation concerns and weighed on T-note prices, with WTI crude oil up more than +4% to an 8.5-month high.  The 10-year breakeven inflation rate rose to a 2-week high of 2.318% on Tuesday. 

T-notes recovered from their worst levels after the stock sell-off prompted some safe-haven buying of government debt.  Also, crude prices fell from early highs after President Trump said the US would provide insurance guarantees and naval escorts for oil tankers and other vessels through the Strait of Hormuz.

European government bond yields moved higher on Tuesday.  The 10-year German bund yield rose to a 2.5-week high of 2.814% and finished up +4.0 bp to 2.752%.  The 10-year UK gilt yield climbed to a 3-week high of 4.553% and finished up +9.7 bp to 4.471%.

The Eurozone Feb CPI rose +1.9% y/y, stronger than expectations of +1.7% y/y.  Feb core CPI rose +2.4% y/y, stronger than expectations of +2.2% y/y.

Swaps are discounting a 0% chance of a -25 bp rate cut by the ECB at its next policy meeting on March 19.

US Stock Movers

Chipmakers and AI-infrastructure stocks sold off on Tuesday, weighing on the broader market.  Sandisk (SNDK) closed down more than -8% to lead losers in the S&P 500, and Micron Technology (MU) closed down more than -7% to lead losers in the Nasdaq 100.  Also, Western Digital (WDC) closed down more than -7%, and KLA Corp (KLAC) closed down more than -6%.  In addition, Applied Materials (AMAT), Lam Research (LRCX), Seagate Technology Holdings Plc (STX), and Intel (INTC) closed down more than -5%, and ASML Holding NV (ASML), NXP Semiconductors NV (NXPI), and Marvell Technology (MRVL) closed down more than -4%.  Finally, Advanced Micro Devices (AMD), Analog Devices (ADI), and Texas Instruments (TXN) closed down more than -3%. 

Mining stocks plunged on Tuesday as gold prices fell more than -3% and silver prices sank more than -6%. Hecla Mining (HL) closed down more than -11%, and Coeur Mining (CDE) and Anglogold Ashanti (AU) closed down more than -10%.  Also, Barrick Mining (B) closed down more than -8%, Newmont Corp (NEM) closed down more than -7%, and Freeport McMoRan (FCX) closed down more than -3%

Cryptocurrency-exposed stocks slid on Tuesday as Bitcoin (^BTCUSD) fell more than -1%.  MARA Holdings (MARA) closed down more than -8%, and Riot Platforms (RIOT) closed down more than -7%.  Also, Galaxy Digital Holdings (GLXY) closed down more than -5%, Strategy (MSTR) closed down more than -3%, and Coinbase Global (COIN) closed down more than -1%. 

Software stocks rallied on Tuesday to limit losses in the broader market.  Workday (WDAY) closed up more than +7% to lead gainers in the S&P 500 and Nasdaq 100. Also, Thomson Reuters (TRI) closed up more than +5%, and Adobe Systems (ADBE) closed up more than -4%.  In addition, ServiceNow (NOW) and Intuit (INTU) closed up more than +3%, and International Business Machines (IBM) closed up more than +2% to lead gainers in the Dow Jones Industrials. Finally, Autodesk (ADSK) closed up more than +2%, and Salesforce (CRM), Microsoft (MSFT), and Palantir Technologies (PLTR) closed up more than +1%.

MongoDB (MDB) closed down more than -22% after forecasting 2027 revenue of $2.86 billion to $2.90 billion, below the consensus of $2.90 billion. 

Sea Lt. (SE) closed down more than -16% after reporting Q4 net income of$410.9 million, weaker than the consensus of $442 million. 

Credo Technology Group Holding Ltd (CRDO) closed down more than -14% after forecasting Q4 revenue of $425 million to 435 million, the midpoint below the consensus of $430.5 million. 

Surgery Partners (SGRY) closed down more than -12% after forecasting full-year revenue of $3.35 billion to $3.45 billion, well below the consensus of $3.56 billion. 

ON Holding AG (ONON) closed down more than -6% after forecasting full-year net sales at constant currencies up +23%, below the consensus of +25.8%. 

Pinterest (PINS) closed up more than +9% after authorizing a new $3.5 billion share repurchase program and announcing a $1 billion strategic investment from Elliot Investment Management.

Best Buy (BBY) closed up more than +7% after reporting Q4 adjusted EPS of $2.61, stronger than the consensus of $2.46.

Target (TGT) closed up more than +6% after forecasting full-year adjusted EPS of $7.50 to $8.50, the midpoint above the consensus of $7.61.

Akami Technologies (AKAM) closed up more than +4% after Streaming Media Blog reported that the company has notified customers of upcoming interim surcharges and pricing adjustments for contract renewals.

Earnings Reports(3/4/2026)

Bath & Body Works Inc (BBWI), Broadcom Inc (AVGO), Brown-Forman Corp (BF/B), Okta Inc (OKTA), Veeva Systems Inc (VEEV).