Stock Indexes Advance as Chip Makers and Travel Stocks Rally

The S&P 500 Index ($SPX) (SPY) on Tuesday closed up +0.25%, the Dow Jones Industrial Average ($DOWI) (DIA) closed up +0.10%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +0.51%.  March E-mini S&P futures (ESH26) rose +0.26%, and March E-mini Nasdaq futures (NQH26) rose +0.52%.

Stocks finished higher on Tuesday amid strength in chipmakers and travel stocks.  Also, lower bond yields were supportive of stocks, as the 10-year T-note yield fell -2 bp to 4.20% after the ADP weekly employment change for the four weeks ended February 28 increased by +9,000, the smallest increase in five weeks, a sign of a slowdown in hiring by US employers.  Stocks also found some support after Tuesday’s report showed US Feb pending home sales unexpectedly rose +1.8% m/m, stronger than expectations of a -0.6% m/m decline.

Stocks were undercut on Tuesday as crude oil prices rose after Iran renewed attacks on key energy infrastructure in the Middle East.  WTI crude oil (CLJ26) rose more than +2% on Tuesday after operations were suspended at the Shah gas field in the United Arab Emirates (UAE), while Iranian drones and missiles also targeted an Iraqi oil field.  Also, crude loadings from the UAE’s port at Fujairah were halted again after Iranian drone attacks. 

The war with Iran is in its eighteenth day with no end in sight. Late Monday, President Trump said he will delay his summit later this month with Chinese President Xi Jinping in China until early May, saying it was important for him to remain in Washington to oversee the military operations against Iran.  Meanwhile, Mr. Trump renewed calls for other nations to help secure the Strait of Hormuz and threatened to expand strikes to Iranian oil infrastructure if Iran keeps up attacks on other Persian Gulf energy producers.

Crude oil prices remain high despite attempts to boost global supplies. The IEA last 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.  Iran has attacked about 20 vessels in the Persian Gulf and near Hormuz since the conflict began.  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 2-day FOMC meeting began on Tuesday, and market expectations are for the Fed to keep the federal funds target range unchanged at 3.50%-3.75%. With the Jan core PCE price index, the Fed’s preferred inflation gauge, at 3.1%, well above the Fed’s 2.0% target, the Fed is expected to signal an extended pause ahead. 

The markets are discounting a 3% chance for a -25 bp FOMC rate cut at the Tue/Wed policy meeting.

Overseas stock markets settled mixed on Tuesday.  The Euro Stoxx 50 closed up +0.53%.  China's Shanghai Composite closed down -0.85%.  Japan's Nikkei Stock 225 closed down -0.09%.

Interest Rates

June 10-year T-notes (ZNM6) on Tuesday closed up by +3.5 ticks.  The 10-year T-note yield fell -1.6 bp to 4.200%.  T-note prices shook off early losses and turned higher on Tuesday after the weak ADP report signaled a slowdown in US employer hiring, which is dovish for Fed policy.  T-notes maintained their gains on strong demand for the Treasury’s $13 billion auction of 20-year T-bonds that had a bid-to-cover ratio of 2.76, above the 10-auction average of 2.62.

Gains in T-notes were limited on Tuesday amid a +2% jump in WTI crude oil prices, which has raised inflation expectations.  Also, an unexpected increase in Feb pending home sales was bearish for T-notes.  In addition, strength in stocks on Tuesday reduced safe-haven demand for T-notes. 

European government bond yields moved lower on Tuesday.  The 10-year German bund yield fell -4.6 bp to 2.906%.  The 10-year UK gilt yield fell -7.6 bp to 4.694%.

The German Mar ZEW survey expectations of economic growth index fell -58.8 to an 11-month low of -0.5, weaker than expectations of 39.2.

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

US Stock Movers

Chip stocks and AI-infrastructure companies moved higher on Tuesday, a supportive factor for the broader market.  Western Digital (WDC) closed up more than +7% to lead gainers in the S&P 500 and Nasdaq 100. Also, ARM Holdings Plc (ARM), Micron Technology (MU), and Seagate Technology Holdings Plc (STX) closed up more than +4%, and KLA Corp (KLAC) and Lam Research (LRCX) closed up more than +2%.  In addition, Applied Materials (AMAT), Qualcomm (QCOM), Microchip Technology (MCHP), and NXP Semiconductors NV (NXPI) closed up more than +1%.

Software stocks were stronger on Tuesday, helping lift the broader market.  International Business Machines (IBM) closed up more than +2% to lead gainers in the Dow Jones Industrials.  Also, CrowdStrike Holdings (CRWD), Intuit (INTU), Datadog (DDOG), ServiceNow (NOW), Autodesk (ADSK), and Adobe Systems (ADBE) closed up more than +1%.

Delta Air Lines (DAL) closed up more than +6% to lead airline stocks higher after raising its Q1 revenue forecast to high-single-digit growth, up from a previous forecast of 5% to 7%.  Also, United Airlines Holdings (UAL) and American Airlines Group (AAL) closed up more than +3%, and Alaska Air Group (ALK) and Southwest Airlines (LUV) closed up more than +1%. 

Travel and hotel stocks rallied on Tuesday after US airline executives said they are seeing an increase in bookings as travelers rush to buy tickets ahead of a likely surge in prices because of fuel costs.  Expedia Group (EXPE) and Hyatt Hotels (H) closed up more than +4%, and Booking Holdings (BKNG), Wynn Resorts Ltd (WYNN), and Airbnb (ABNB) closed up more than +3%.  Also, MGM Resorts International (MGM) and Marriott International (MAR) closed up more than +2%, and Las Vegas Sands (LVS) and Hilton Worldwide Holdings (HLT) closed up more than +1%. 

Lemonde Inc (LMND) closed up more than +16% after Morgan Stanley upgraded the stock to overweight from equal weight with a price target of $85. 

Uber Technologies (UBER) closed up more than +4%, and Lyft (LYFT) closed up more than +3% after Nvidia announced separate autonomous vehicle partnerships with the companies. 

Align Technology (ALGN) closed up more than +4% after Barclays upgraded the stock to overweight from equal weight with a price target of $200.

Dover Corp (DOV) closed up more than +3% after Wells Fargo Securities upgraded the stock to overweight from equal weight with a price target of $230. 

Janus Henderson Group Plc (JHG) closed up more than +2% after Victory Capital revised its bid to acquire the company.

Semtech (SMTC) closed down more than -11% after forecasting Q1 adjusted EPS of 42 cents to 48 cents, the low end of the range below the consensus of 43 cents. 

Trade Desk (TTD) closed down more than -7% to lead losers in the S&P 500 after Adweek said Publicis was telling clients to avoid working with the company after it failed an audit conducted by a third-party consultant evaluating Trade Desk’s fees and spending. 

Eli Lilly & Co (LLY) closed down more than -5% to lead losers in the S&P 500 after HSBC downgraded the stock to sell from hold with a price target of $850.

Cencora (COR) closed down more than -3% after the company said CFO James Cleary will retire on June 30.

Honeywell International (HON) closed down more than -1% after executives said the Iran war is a headwind to Q1 revenue.

Earnings Reports(3/18/2026)

Five Below Inc (FIVE), General Mills Inc (GIS), Jabil Inc (JBL), Macy's Inc (M), Micron Technology Inc (MU), SailPoint Inc (SAIL), Williams-Sonoma Inc (WSM).