Page One
Briefing.com Summary:
*Rate-cut expectations are being pushed out—way out.
*Higher oil prices, rising Treasury yields, and dimming growth prospects are an overhang for risk assets.
*Micron posted blowout earnings results and guidance, but the stock is down in a sell-the-news response
The market's worries over the Iran war are building. The main concern is that it is driving up energy prices, which is expected to lead to a pickup in inflation in the near term. The main realization is that those concerns are also being appreciated by the world's central bankers, who are not inclined at this time to cut interest rates.
That was the tacit message in Fed Chair Powell's remarks at his press conference yesterday, and it is the prevailing expectation in the fed funds futures market. According to the CME FedWatch Tool, the probability of a 25-basis-point cut to 3.25-3.50% doesn't exceed 50% until the September 2027 FOMC meeting.
Notably, the Bank of Japan, Swiss National Bank, and Bank of England all left their key policy rates unchanged, and the ECB is expected to do the same when it releases its decision at 9:15 a.m. ET.
The shift in rate-cut expectations has been a major buzzkill for the stock market, which is also sobering up at the sight of rising Treasury yields.
The 2-yr note yield is up 14 basis points to 3.89%, and the 10-yr note yield is up four basis points to 4.30%. The 2-yr note yield is up 50 basis points this month, while the 10-yr note yield is up 34 basis points in a bear flattener trade.
There is nothing flat about energy prices. WTI crude futures are up 0.8% to $97.07/bbl, but Brent crude futures, which topped $118.00/bbl overnight, are up 5.9% to $113.67/bbl. The latter, and a 20% spike in natural gas prices that has been attributed to Iran attacking Qatar's LNG facilities at Ras Laffan, factors more for Europe and Asia than the U.S., but it is all factored into global economic growth prospects.
Those prospects are dimming because market participants are worried this war might go on longer than feared, either militarily or economically—or both.
That is a distinct overhang for risk assets, which have a nervous flutter this morning that has been exacerbated by President Trump's warning to Iran that the U.S. will "massively blow up the entirety of the South Pars Gas Field" if Iran attacks Qatar.
The other flutter stems from the recognition that Micron (MU) is down 5.9% after a blowout earnings report and outlook. Perhaps there will be a turnaround in the more liquid cash session, yet the initial response is not working in the market's favor.
Currently, the S&P 500 futures are down 45 points and are trading 0.7% below fair value, the Nasdaq 100 futures are down 207 points and are trading 0.9% below fair value, and the Dow Jones Industrial Average futures are down 301 points and are trading 0.7% below fair value.
The fog of war is clouding things, so there has been little appreciation this morning for an otherwise solid jobless claims report.
Initial jobless claims for the week ending March 14 decreased by 8,000 to 205,000 (Briefing.com consensus: 215,000). Continuing jobless claims for the week ending March 7 increased by 10,000 to 1.857 million.
The key takeaway from the report is that the low level of initial jobless claims will keep the Fed preoccupied for now with the inflation side of its mandate, which is to say it won't be inclined to cut rates.
