Stocks Fall as Crude Oil Surge Stokes Inflation Fears

The S&P 500 Index ($SPX) (SPY) today is down -0.67%, the Dow Jones Industrial Average ($DOWI) (DIA) is down -1.46%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -0.36%.  March E-mini S&P futures (ESH26) are down -0.70%, and March E-mini Nasdaq futures (NQH26) are down -0.45%.

Stock indexes are under pressure today amid concerns about inflation, as oil prices rose amid mounting disruptions to energy markets from the war in Iran.  WTI crude (CLJ26) is up more than +6% at a 13.5-month high, fueling inflation concerns and sending bond yields higher.  The 10-year T-note yield rose to a 3-week high today of 4.15%.

Stocks have underlying support from some positive economic and corporate news.  Weekly US jobless claims rose less than expected, and Q4 nonfarm productivity rose more than expected.  Also, Broadcom is up by more than 5% after CEO Tan said the company expects AI chip sales to top $100 billion next year.  In addition, strength in software stocks today is limiting losses in the broader market.

The US-Israeli war on Iran entered a sixth day with Iran pledging to escalate its retaliation.  Arab states across the Persian Gulf reported interceptions of Iranian missiles and drones overnight and into today.

Crude prices continued to climb and posted a 13.5-month high today as the Strait of Hormuz remains closed, halting most energy shipments from the Persian Gulf.  Iran's Islamic Revolutionary Guard Corps has warned ships not to sail through the passageway, saying that vessels "could be at risk from missiles or rogue drones."  The closure of the Strait of Hormuz, which handles a fifth of the world's oil, has curbed exports and forced Gulf producers to stockpile the crude locally in storage tanks.  Iraq, OPEC's second-largest producer, shut down oil production at its largest oil fields in Rumalia as local storage tanks filled up.  Also, Kayrros reported on Wednesday that four of six tanks at Saudi Arabia's Ras Tanura refinery were full, and the Ju'aymah terminal on the country's east coast is quickly running out of spare capacity.  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. 

In addition, damage from an intercepted Iranian drone caused a major fire on Tuesday 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 surged to a 3-year high on Tuesday 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.  China today told its largest refiner to suspend exports of diesel and gasoline due to the escalating conflict in the Persian Gulf, which will tighten global fuel supplies and push fuel prices even higher. 

US Feb Challenger job cuts fell -71.9% y/y to 48,307.

US weekly initial unemployment claims were unchanged at 213,000, showing a slightly stronger labor market than expectations of 215,000.

Q4 nonfarm productivity rose +2.8%, better than expectations of +1.9%. Q4 unit labor costs rose by +2.8%, stronger than expectations of +2.0%.

Hawkish comments today from Richmond Fed President Tom Barkin were bearish for stocks when he said recent and expected data reflect "a couple months of relatively high inflation," which "certainly puts pause to any conclusion that we're done fighting this."

This week's market focus will be on US-Iran war news, corporate earnings, and economic news.  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 4% chance for a -25 bp rate cut at the next policy meeting on March 17-18.

Overseas stock markets are mixed today.  The Euro Stoxx 50 is down -0.94%.  China’s Shanghai Composite closed up +0.64%.  Japan’s Nikkei Stock 225 closed up +1.90%.

Interest Rates

June 10-year T-notes (ZNM6) today are down -13 ticks.  The 10-year T-note yield is up +3.5 bp to 4.131%.  Jun T-notes fell to a 3-week low today, and the 10-year T-note yield rose to a 3-week high of 4.146%.  Growing inflation fears are weighing on T-note prices after WTI crude oil rallied to a 13.5-month high today, boosting inflation expectations, with the 10-year breakeven rate climbing to a 2.5-week high of 2.318%.  Also, today’s US economic reports, which showed weekly jobless claims rose less than expected, and Q4 unit labor costs rose more than expected, were hawkish for Fed policy and bearish for T-notes. 

European government bond yields are moving higher today.  The 10-year German bund yield rose to a 3.5-week high of 2.840% and is up +8.9 bp to 2.839%.  The 10-year UK gilt yield is up +8.5 bp to 4.525%.

Eurozone Jan retail sales unexpectedly fell -0.1% m/m, weaker than expectations of +0.3% m/m

ECB Vice President Luis de Guindos said a prolonged conflict in the Middle East would risk pushing inflation expectations higher.

ECB Governing Council member and Bundesbank President Joachim Nagel said inflation is a bigger concern than economic growth as the ECB assesses the implications of the war in Iran.

Swaps are discounting a 6% chance of a -25 bp rate hike by the ECB at its next policy meeting on March 19.

US Stock Movers

Chipmakers and AI-infrastructure stocks are under pressure today, weighing on the broader market.  ARM Holdings Plc (ARM) is down more than -2%. Also, Applied Materials (AMAT), Lam Research (LRCX), Analog Devices (ADI), KLA Corp (KLAC), NXP Semiconductors NV (NXPI), and Texas Instruments (TXN) are down more than -1%. 

Airline stocks are sliding today amid a surge in crude oil prices, which are up by more than 6% to a 13.5-month high, boosting jet fuel prices and potentially cutting into airlines’ profits.  Alaska Air Group (ALK) is down more than -7%, and American Airlines Group (AAL), United Airlines Holdings (UAL), and Delta Air Lines (DAL) are down more than -5%.  Also, Southwest Airlines (LUV) is down more than -4%.

Software stocks are climbing today to limit losses in the broader market.  Atlassian (TEAM) and ServiceNow (NOW) are up more than+5%, and Intuit (INTU) and Thomson Reuters (TRI) are up more than +4%. Also, Salesforce (CRM) is up more than +3% to lead gainers in the Dow Jones Industrials, and Datadog (DDOG) and Workday (WDAY) are up more than +3%.  In addition, Adobe Systems (ADBE) is up more than +2%, and Oracle (ORCL) and Autodesk (ADSK) are up more than +1%.

Online travel agencies are climbing today after Mizuho Securities said a report that ChatGPT is pivoting away from on-platform shopping checkout, if true, would be a “waterloo moment for AI-disruption of e-commerce.” Expedia Group (EXPE) is up more than +8%, and Booking Holdings (BKNG) is up more than +6%.  Also, TripAdvisor (TRIP) is up more than +4%, and DoorDash (DASH) is up more than +3%. 

American Eagle Outfitters (AEO) is down more than -12% after CFO Mathias said that most of the company’s profit will be generated in the second half of the year.

Stubhub Holdings (STUB) is down more than -11% after reporting Q4 loss per share of -$1.56, a much bigger loss than the consensus of -$0.03, and forecasting 2026 gross merchandise sales of $9.9 billion to $10.1 billion, well below the consensus of $12.3 billion. 

IREN Ltd (IREN) is down more than -7% after filing for the possible offering of up to $6 billion shares of common stock. 

McKesson Corp (MCK) is down more than -4% after CFO Vitalone said he will retire on May 29.

Walmart (WMT) is down more than -3% to lead losers in the Dow Jones Industrials and Nasdaq 100 after Erste Group downgraded the stock to hold from buy.

BJ’s Wholesale Club Holdings (BJ) is down more than -2% after forecasting 2027 adjusted EPS of $4.40 to $4.60, below the consensus of $4.66. 

Trade Desk (TTD) is up more than +19% to lead gainers in the S&P 500 after The Information reported that the company held talks to help OpenAI sell ads. 

Astera Labs (ALAB) is up more than +6% after Loop Capital Markets initiated coverage on the stock with a buy recommendation and a $250 price target.

Broadcom (AVGO) is up more than +5% after CEO Tan said the company expects its AI chip sales to top $100 billion next year. 

Burlington Stores (BURL) is up more than +3% after reporting  Q4 adjusted EPS of $4.89, better than the consensus of $4.72, and forecasting 2027 adjusted EPS of $10.95 to $11.45, the midpoint above the consensus of $11.11. 

Veeva Systems (VEEV) is up more than +2% after reporting Q4 revenue of $836.0 million, better than the consensus of $810.4 million, and forecasting 2027 revenue of $3.59 billion to $3.60 billion, stronger than the consensus of $3.57 billion. 

Fastenal (FAST) is up more than +1% after reporting that its daily sales rate for February increased by 13%, well above Barclays’ estimate of 7.2%.

Earnings Reports(3/5/2026)

BJ's Wholesale Club Holdings Inc (BJ), Burlington Stores Inc (BURL), Ciena Corp (CIEN), Cooper Cos Inc/The (COO), Costco Wholesale Corp (COST), Gap Inc/The (GAP), Guidewire Software Inc (GWRE), Kroger Co/The (KR), Marvell Technology Inc (MRVL), Samsara Inc (IOT), Toro Co/The (TTC).