Stocks Sharply Lower on Iran War and Hawkish Powell

The S&P 500 Index ($SPX) (SPY) on Wednesday closed down -1.36%, the Dow Jones Industrial Average ($DOWI) (DIA) closed down -1.63%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -1.43%.  March E-mini S&P futures (ESH26) fell -1.42%, and March E-mini Nasdaq futures (NQH26) fell -1.45%.

Stocks sold off on Wednesday, with the Dow Jones Industrial Average falling to a 3.75-month low.  Stocks retreated on Wednesday after US Feb producer prices rose more than expected, a sign of sticky price pressures.  Stocks added to their losses today after WTI crude oil prices (CLJ26) whipsawed higher on signs of escalation of the Iran war after Iran said it will target energy infrastructure in Saudi Arabia, Qatar, and the UAE in retaliation for US and Israeli airstrikes on its South Pars gas field and its Asaluyeh oil industry facilities. 

Stocks extended their losses Wednesday afternoon as bond yields soared after Fed Chair Powell said higher energy prices will push up overall inflation and that, if we don't see progress in reducing inflation, we "won't see a rate cut."  The 10-year T-note yield rose +5 bp to 4.25%.

US MBA mortgage applications fell -10.9% in the week ended March 13, with the purchase mortgage sub-index up +0.9% and the refinancing mortgage sub-index down -18.5%.  The average 30-year fixed rate mortgage rose +11 bp to 6.30% from 6.19% the prior week.

US Feb PPI final demand rose +0,7% m/m and +3.4% y/y, stronger than expectations of +0.3% m/m and +3.0% y/y.  Feb PPI ex-food and energy rose +0.5% m/m and +3.9% y/y, stronger than expectations of +0.3% m/m and +3.7% y/y, with the +3.9% y/y gain the largest year-on-year increase in 13 months.

US Jan factory orders rose +0.1% m/m, right on expectations.

As expected, the FOMC voted 11-1 to keep the fed funds target range unchanged at 3.50% to 3.75% and said, "US economic activity has been expanding at a solid pace, and inflation remains somewhat elevated." 

The Fed boosted its 2026 US GDP forecast to 2.4% from 2.3% and raised its 2026 US core PCE projection to 2.7% from 2.5%.

The FOMC kept its year-end 2026 federal funds rate projection at 3.375%, implying one quarter point (25 bp) interest rate cut this year.

The war against Iran entered its nineteenth day on Wednesday with no signs of easing as Iran stepped up attacks on its Middle Eastern neighbors in retaliation for the killing of its security chief, Ali Larijani, in an Israeli strike.  Iran today launched fresh waves of missiles and drone attacks, targeting the United Arab Emirates, Saudi Arabia, Kuwait, Qatar, and Israel, with Qatar reporting “extensive damage” at the world’s largest natural gas export plant at Ras Laffan Industria City.

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 markets are discounting a 0% chance for a -25 bp FOMC rate cut at the April 28-29 policy meeting.

Overseas stock markets settled mixed on Wednesday.  The Euro Stoxx 50 fell from a 1-week high and closed down -0.56%.  China's Shanghai Composite recovered from a 6-week low and closed up +0.32%.  Japan's Nikkei Stock 225 closed up sharply by +2.87%.

Interest Rates

June 10-year T-notes (ZNM6) on Wednesday closed down by -14.5 ticks.  The 10-year T-note yield rose +5.0 bp to 4.249%.  T-notes gave up early gains on Wednesday and turned lower after US Feb producer prices rose more than expected, a hawkish factor for Fed policy.  Also, higher inflation expectations weighed on T-notes after the 10-year breakeven inflation rate rose to a 6.5-month high of 2.422% on Wednesday.

T-note prices fell to their low on Wednesday afternoon after the FOMC kept interest rates unchanged and raised its 2026 US GDP and inflation forecasts, signaling a hawkish Fed policy.  Also, comments from Fed Chair Powell undercut T-notes when he said there will be no Fed rate cuts unless there is progress on inflation. 

European government bond yields moved higher on Wednesday.  The 10-year German bund yield rose +3.4 bp to 2.940%.  The 10-year UK gilt yield rose +4.5 bp to 4.738%.

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

US Stock Movers

The Magnificent Seven technology stocks closed lower on Wednesday, weighing on the overall market. Amazon.com (AMZN) closed down more than -2%, and Tesla (TSLA), Nvidia (NVDA), Alphabet (GOOGL), Apple (AAPL), Meta Platforms (META), and Microsoft (MSFT) closed down more than -1%. 

Mining stocks sold off on Wednesday as gold prices fell more than -3%, and copper and silver fell more than -4%.  Coeur Mining (CDE) closed down more than -8%, and Barrick Mining (B), Southern Copper (SCCO), and Hecla Mining (HL) closed down more than -5%.  Also, Newmont Mining (NEM) and Freeport-McMoRan (FCX) closed down more than -4%, and Anglogold Ashanti Ltd (AU) closed down more than -3%.

Cryptocurrency-exposed stocks moved lower on Wednesday as Bitcoin (^BTCUSD) fell more than -4%.  Galaxy Digital Holdings (GLXY) closed down more than -8%, and Strategy (MSTR) closed down more than -6% to lead losers in the Nasdaq 100.  Also, Coinbase Global (COIN), Riot Platforms (RIOT), and MARA Holdings (MARA) closed down more than -3%. 

Building stocks and building suppliers retreated on Wednesday after the 10-year Y-note yield rose +5 bp to 4.25%, undercutting home-buying prospects.  Builders Firstsource (BLDR) and Pulte Group (PHM) closed down more than -4%, and DR Horton (DHI), Lennar (LEN), KB Home (KBH), Toll Brothers (TOL), and Home Depot (HD) closed down more than -3%.

Optical fiber companies moved higher on Wednesday after speaking of accelerating demand for their products at the Optical Fiber Communications Conference.  Lumentum (LITE) and Applied Optoelectronics (AAOI) closed up more than +7%.  Also, Coherent (COHR) closed up more than +4%.

SailPoint (SAIL) closed down more than -15% after forecasting 2027 revenue of $1.26 billion to $1.27 billion, below the consensus of $1.28 billion.

Rocket Lab (RKLB) closed down more than -11% after filing to sell as much as $1 billion worth of shares of common stock.

Otis Worldwide (OTIS) closed down more than -6% after saying it expects EPS to fall between 3% and 5% y/y in Q1 and similar in Q2.

Trade Desk (TTD) closed down more than -6%, adding to Tuesday’s -7% decline, 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. 

Starbucks (SBUX) closed down more than -5% after RBC Capital Markets downgraded the stock to sector perform from outperform.

General Mills (GIS) closed down -3% after reporting Q3 adjusted EPS of 64 cents, weaker than the consensus of 74 cents.

Swarmer (SWMR) closed up more than +77% on speculation that a shift in US defense spending to more low-cost drones will boost demand for the company’s drone software. 

LyondellBasell Industries NV (LYB) closed up more than +5% to lead gainers in the S&P 500 after UBS upgraded the stock to neutral from sell. 

Macy’s (M) closed up more than +4% after reporting Q4 net sales of $7.64 billion, above the consensus of $7.51 billion, and forecasting full-year net sales of $21.40 billion to $21.65 billion, better than the consensus of 21.11 billion. 

Constellation Energy (CEG) closed up more than +3% to lead gainers in the Nasdaq 100 after BNP Paribas initiated coverage on the stock with a recommendation of outperform and a price target of $407.

Lululemon Athletica (LULU) closed up more than +3% after reporting Q4 net revenue of $3.64 billion, above the consensus of $3.58 billion.

Grail Inc. (GRAL) closed up more than +2% after TD Cowen upgraded the stock to buy from hold with a price target of $65. 

Williams-Sonoma (WSM) closed up more than +1% after reporting Q4 adjusted EPS of $3.04, stronger than the consensus of $2.92. 

Earnings Reports(3/19/2026)

Accenture PLC (ACN), Darden Restaurants Inc (DRI), FedEx Corp (FDX).