Stocks Finish Lower as War Rages in the Middle East

The S&P 500 Index ($SPX) (SPY) on Thursday closed down -0.56%, the Dow Jones Industrial Average ($DOWI) (DIA) closed down -1.61%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -0.29%.  March E-mini S&P futures (ESH26) fell -0.60%, and March E-mini Nasdaq futures (NQH26) fell -0.35%.

Stock indexes retreated on Thursday, with the Dow Jones Industrials falling to a 2.75-month low.   Stocks were under pressure Thursday amid concerns about inflation, as oil prices surged amid mounting disruptions to energy markets from the war in Iran.  WTI crude (CLJ26) soared more than +8% at a 19.5-month high, fueling inflation concerns and sending bond yields higher.  However, crude prices fell by more than $3 a barrel from their high in late trading Thursday afternoon when US Secretary of the Interior Burgum said the government is considering emergency measures to stabilize crude prices.  The 10-year T-note yield rose to a 3-week high on Thursday of 4.15%.

Losses in stocks were contained amid underlying support from some of Thursday’s positive economic and corporate news.  Weekly US jobless claims rose less than expected, and Q4 nonfarm productivity rose more than expected.  Also, Broadcom rose 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 on Thursday limited losses in the broader market.

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

Crude prices continued to climb and posted a 19.5-month high Thursday 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.  On Thursday, China 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 settled mixed on Thursday.  The Euro Stoxx 50 closed down -1.50%.  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) on Thursday closed down by -16 ticks.  The 10-year T-note yield rose by +3.5 bp to 4.131%.  Jun T-notes fell to a 3-week low on Thursday, and the 10-year T-note yield rose to a 3-week high of 4.148%.  Growing inflation fears are weighing on T-note prices after WTI crude oil rallied to a 19.5-month high Thursday, boosting inflation expectations, with the 10-year breakeven rate climbing to a 3-week high of 2.329%.  Also, Thursday’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 moved higher on Thursday.  The 10-year German bund yield rose to a 3.5-week high of 2.854% and finished up +9.1 bp to 2.841%.  The 10-year UK gilt yield climbed toa 3.5-week high of 4.558% and finished up +10.1 bp to 4.542%.

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 5% 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 were under pressure on Thursday, weighing on the broader market.  Lam Research (LRCX) closed down more than -4%, and ARM Holdings Plc (ARM), Analog Devices (ADI), Applied Materials (AMAT), KLA Corp (KLAC), NXP Semiconductors NV (NXPI), Marvell Technology (MRVL), and Microchip Technology (MCHP) closed down more than -3%.  Also, Seagate Technology Holdings Plc (STX), ASML Holding NV (ASML), and Texas Instruments (TXN) closed down more than -2%. 

Airline stocks sold off on Thursday as crude oil prices soared more than +8% to a 19.5-month high, boosting jet fuel prices and potentially cutting into airlines’ profits. Alaska Air Group (ALK) closed down more than -9%, and Southwest Airlines (LUV) closed down more than -6%.  Also,

American Airlines Group (AAL) and United Airlines Holdings (UAL) closed down more than -5%, and Delta Air Lines (DAL) closed down more than -3%. 

Homebuilders moved lower on Thursday after the 10-year T-note yield jumped to a 3-week high, which boosts mortgage rates and is a negative factor for housing demand.  Lennar (LEN), Toll Brothers (TOL), and KB Home (KBH) closed down more than -2%.  Also, PulteGroup (PHM)   and DR Horton (DHI) closed down more than -1%. 

Software stocks rose on Thursday to limit losses in the broader market.  Atlassian (TEAM) closed up more than +7%, and ServiceNow (NOW) and Intuit (INTU) closed up more than +5%.  Also, Salesforce (CRM) closed up more than +4% to lead gainers in the Dow Jones Industrials, and Thomson Reuters (TRI) closed up more than +4%.  In addition, Datadog (DDOG) and Adobe Systems (ADBE) closed up more than +3%, and Workday (WDAY) and Autodesk (ADSK) closed up more than +2%.

Online travel agencies rallied on Thursday 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) closed up more than +13%, and Booking Holdings (BKNG) closed up more than +8%.  Also, DoorDash (DASH) closed up more than +3%, and TripAdvisor (TRIP) closed up more than +2%. 

American Eagle Outfitters (AEO) closed down more than -13% after CFO Mathias said that most of the company’s profit will be generated in the second half of the year.

Stubhub Holdings (STUB) closed down more than -12% 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) closed down more than -8% after filing for the possible offering of up to $6 billion shares of common stock. 

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

Walmart (WMT) closed down more than -3% 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) closed up more than +18% to lead gainers in the S&P 500 after The Information reported that the company held talks to help OpenAI sell ads. 

Burlington Stores (BURL) closed up more than +7% 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. 

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

Astera Labs (ALAB) closed up more than +5% after Loop Capital Markets initiated coverage on the stock with a buy recommendation and a $250 price target.

Veeva Systems (VEEV) closed up more than +4% 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) closed up more than +2% after reporting that its daily sales rate for February increased by 13%, well above Barclays’ estimate of 7.2%.

Earnings Reports(3/6/2026)

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