Iran War Drags Stocks Lower

The S&P 500 Index ($SPX) (SPY) on Friday closed down -0.61%, the Dow Jones Industrial Average ($DOWI) (DIA) closed down -0.26%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -0.62%.  March E-mini S&P futures (ESH26) fell -0.60%, and March E-mini Nasdaq futures (NQH26) fell -0.66%.

Stocks gave up an early advance on Friday and retreated, with the S&P 500 and Dow Jones Industrials falling to 3.5-month lows.  Stocks fell after crude oil prices recovered from early losses and rallied more than +3%, as the war in Iran shows no signs of abating. The Wall Street Journal reported on Friday that the US is moving a Marine expeditionary unit to the Middle East as Iran steps up attacks on the Strait of Hormuz.

Stocks initially moved higher on Friday when WTI crude oil gave up overnight gains and fell more than -2% after the US granted a temporary waiver allowing buyers to take Russian oil cargoes already at sea.  The US Treasury granted a month-long waiver to import Russian oil loaded before Thursday, covering Russian crude oil and fuel on about 30 tankers carrying at least 19 million barrels.  Crude was also briefly pressured after the Financial Times reported that France and Italy had opened talks with Iran to negotiate a deal to guarantee the safe passage of their ships through the Strait of Hormuz. 

Crude prices also found support on Friday after US officials said Iran has begun laying mines in the Strait of Hormuz, an effort that could further complicate US efforts to restart shipping in the waterway.  Despite the US destroying most large ships in the Iranian navy used to lay mines, Iran began using smaller boats for the operation on Thursday, according to a US official briefed on the intelligence.  Goldman Sachs warns that crude prices could exceed the 2008 record high of close to $150 a barrel if flows through the Strait of Hormuz remain depressed through March.

The latest rhetoric from President Trump and Iranian leader Khamenei suggests there will be no immediate easing in the war that has disrupted energy shipments in the Middle East and spurred concerns about rising inflation.  Global bond yields have soared this week on inflation fears, with the German 10-year bund yield rising to a 2.25-year high of 2.99% on Friday and the 10-year T--note yield climbing to a 1.25-month high at 4.29%. 

Crude oil prices remain underpinned despite attempts to boost global supplies.  The IEA on Wednesday released 400 million barrels from emergency oil stockpiles and said the war against Iran is disrupting 7.5% of global oil supply, and the conflict will cut global oil supply by 8 million bpd this month.  The closure of the Strait of Hormuz, through which about a fifth of the world’s oil and natural gas flows, has choked off oil and gas flows due to Iran’s attacks on shipping in the waterway and forced Gulf producers to cut output because they can’t export from the region. 

Friday’s US economic news was mixed for stocks.  Jan personal spending, Jan JOLTS job openings, and the University of Michigan US Mar consumer sentiment index all rose more than expected.  However, Jan capital goods new orders nondefense ex-aircraft and parts, a proxy for capital spending, were weaker than expected.  Also, Q4 GDP was revised lower, and the Jan core PCE price index, the Fed's preferred inflation gauge, rose by the most in 1.75 years.

US Jan personal spending rose +0.4% m/m, stronger than expectations of +0.3% m/m.  Jan personal income rose +0.4% m/m, weaker than expectations of +0.5% m/m.

The US Jan core PCE price index, the Fed's preferred inflation gauge, rose +3.1% y/y, right on expectations and the highest in 1.75 years.

US Jan capital goods new orders nondefense ex-aircraft and parts were unchanged m/m, weaker than expectations of +0.5% m/m.

US Q4 GDP was revised downward to +0.7% (q/q annualized) from the previously reported +1.4% as Q4 personal consumption was revised lower to +2.0% from the previously reported +2.4%.

The University of Michigan US consumer sentiment index fell -1.1 to 55.5, stronger than the 54.8 expected.

The University of Michigan's US Mar 1-year inflation expectations were unchanged from Feb at 3.4%, below expectations of a rise to 3.7%. The Mar 5-10 year inflation expectations unexpectedly fell to 3.2% from 3.3% in Feb, weaker than expectations of an increase to 3.4%.

US Jan JOLTS job openings rose +396,000 to 6.946 million, stronger than expectations of 6.750 million.

Q4 earnings season is nearly over, with more than 98% of the S&P 500 companies having reported earnings results.  Earnings have been a positive factor for stocks, with 74% of the 495 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 1% chance for a -25 bp FOMC rate cut at the next policy meeting on March 17-18.

Overseas stock markets settled lower on Friday.  The Euro Stoxx 50 closed down -0.56%.  China's Shanghai Composite closed down -0.82%.  Japan's Nikkei Stock 225 closed down -1.16%.

Interest Rates

June 10-year T-notes (ZNM6) on Friday closed unchanged.  The 10-year T-note yield rose +1.8 bp to 4.279%.  June T-notes fell to a 1.25-month low on Friday, and the 10-year T-note yield climbed to a 5-week high of 4.289%.  T-notes gave up an early advance on Friday after crude oil prices jumped more than +3%, which fueled inflation fears.  Also, mixed US economic news limited gains in T-notes after Jan JOLTS job openings, and the University of Michigan Mar consumer sentiment index rose more than expected, hawkish factors for Fed policy.  Conversely, Q4 GDP was revised lower, and Jan capital goods new orders rose less than expected, supportive factors for T-notes.  Also, Friday’s stock weakness sparked some safe-haven demand for T-notes.

European government bond yields moved higher on Friday.  The 10-year German bund yield rose to a 2.25-year high of 2.992% and finished up +2.6 bp to 2.983%.  The 10-year UK gilt yield rose to a 6.25-month high of 4.825% and finished up +4.9 bp to 4.823%.

UK Jan GDP was unchanged m/m, weaker than expectations of +0.2% m/m.

UK Jan manufacturing production rose +0.1% m/m, weaker than expectations of +0.2% m/m.

Swaps are discounting a 3% chance of a -25 bp ECB rate hike at its next policy meeting on March 19.

US Stock Movers

Meta Platforms (META) closed down more than -3% to lead the Magnificent Seven technology stocks lower after the New York Times reported that the company’s latest AI model has underperformed expectations and will be delayed.  Also, Apple (AAPL) closed down more than -2%, and Microsoft (MSFT) and Nvidia (NVDA) closed down more than -1%.  In addition, Tesla (TSLA) closed down -0.96%.  Amazon.com (AMZN) closed down -0.89% and Alphabet (GOOGL) closed down -0.42%.

Chip stocks and AI-infrastructure companies moved higher on Friday, a supportive factor for the broader market.  Sandisk (SNDK) closed up more than +6% to lead gainers in the S&P 500, and Micron Technology (MU) closed up more than +4% to lead gainers in the Nasdaq 100.  Also, Western Digital (WDC) closed up more than +4%, and Seagate Technology Holdings Plc (STX) closed up more than +2%.  In addition, Lam Research (LRCX), Applied Materials (AMAT), and Intel (INTC) closed up more than +1%. 

Cryptocurrency-exposed stocks moved higher on Friday as Bitcoin (^BTCUSD) rose more than +1% to a 1-week high.  Galaxy Digital Holdings (GLXY) closed up more than +8%, and MARA Holdings (MARA) closed up more than +6%.  Also, Strategy (MSTR) and Coinbase Global (COIN) closed up more than +1%. 

Mining stocks sold off on Friday as copper prices fell more than -2%, gold prices fell more than -1%, and silver prices dropped more than -4%.  Anglogold Ashanti Ltd (AU) closed down more than -9%, and Coeur Mining (CDE) closed down more than -6%.  Also, Southern Copper (SCCO) closed down more than -5%, and Newmont Mining (NEM), Hecla Mining (HL), Barrick Mining (B), and Freeport-McMoRan (FCX) closed down more than -4%. 

Fertilizer stocks retreated on Friday, giving back some of this week’s sharp gains.  Intrepid Potash (IPI) and Mosaic (MOS) closed down more than -6%, and CF Industries Holdings (CF) closed down more than -4%.

EverCommerce (EVCM) closed down more than -15% after forecasting Q1 revenue of $145.5 million to $148.5 million, well below the consensus of $151 million.

Ulta Beauty (ULTA) closed down more than -14% to lead losers in the S&P 500 after it forecast full-year comparable sales will increase 2.5% to 3.5%, below the consensus of 3.5%. 

Adobe (ADBE) closed down more than -7% to lead losers in the Nasdaq 100 after CEO Narayen said he will resign and remain in his post until a successor has been appointed. 

Insulet (PODD) closed down more than -6% after it issued a voluntary recall of some Omnipod 5 Pods due to a manufacturing issue that led to 18 reports of serious adverse events.

ServiceTitan (TTAN) closed down more than -5% after reporting a Q4 EPS loss of -44 cents, wider than the consensus of -41 cents.

Klarna Group Plc (KLAR) closed up more than +9% after an SEC filing showed Chairman Morits purchased 3.47 million shares through an associated entity between March 3 and March 11.

Charles Schwab (SCHW) closed up more than +2% after it expects revenue growth of 16% in Q1 and said the company’s “diversified financial model continues to deliver.” 

Carvana (CVNA) closed up more than +2% after its board approved a 5-for-1 split of its common stock.

Circle Internet Group (CRCL) closed up more than +1% after Mizuho Securities raised its price target on the stock to $120 from $100.

Earnings Reports(3/16/2026)

Dollar Tree Inc (DLTR) and Science Applications International (SAIC).