Stock Market Update

[BRIEFING.COM] Stocks had an eventful start to March, with the subdued finishes of the S&P 500 (flat), Nasdaq Composite (+0.4%), and DJIA (-0.2%) betraying the intraday volatility. 

The market opened to considerable losses after a busy weekend of geopolitical headlines that included joint strikes by the U.S. and Israel taking out much of Iran's senior government and military leadership. Iran launched its own strikes on bases across several countries in the region in response, sending oil prices surging and disrupting international travel. 

The energy sector (+2.0%) was the only S&P 500 sector to trade higher for some of the morning and finished as today's top mover. Crude oil futures settled today's session $4.17 higher (+6.2%) at $71.23 per barrel, though they spiked higher after the session's close following a Reuters report that Iran will attack any ship that attempts to traverse the Strait of Hormuz. 

The late-session headline saw stocks retreat from their best levels, which briefly pushed the major averages modestly higher across the board. 

The industrials sector (+1.0%) was another standout today, with its gains largely attributed to the conflict in Iran. Aerospace and defense names such as Axon (AXON 572.02, +29.62, +5.46%), Northrop Grumman (NOC 768.02, +43.64, +6.02%), and RTX (RTX 212.16, +9.54, +4.71%) were among the top performers, helping the iShares DJ Aerospace ETF finish 2.8% higher.

The gains offset weakness across airline names such as United Airlines (UAL 103.21, -3.09, -2.91%) and Delta Air Lines (DAL 64.25, -1.45, -2.21%). 

The top-weighted information technology sector (+0.9%) played a pivotal role in helping the major averages overcome their early losses. The sector opened to modest losses but quickly began to chart a higher course throughout the session until the Strait of Hormuz headlines saw it give back a chunk of its best levels. 

With the U.S. directly involved in conflict in Iran, it is not surprising that Palantir Technologies (PLTR 145.13, +7.94, +5.79%) was a standout today. However, it is worth noting that the broader software space saw solid gains across a number of components today, sending the iShares GS Software ETF 1.5% higher. 

Microsoft (MSFT 398.55, +5.81, +1.48%) posted a nice gain, though NVIDIA (NVDA 182.48, +5.29, +2.99%) was the true “Magnificent Seven” standout after a weekend report from The Wall Street Journal said the company plans to unveil a new chip designed to speed up AI processing, helping the stock recover a chunk of its post-earnings skid.

The real estate sector (+0.3%) also captured a gain, while the seven other S&P 500 sectors finished lower. 

The consumer discretionary sector (-1.1%) was a laggard as a majority of its components traded lower today. Losses were particularly acute across travel names amid the rising fuel costs and geopolitical headlines. Norwegian Cruise Line (NCLH 22.19, -2.60, -10.49%) was among the worst-performing S&P 500 names today after missing revenue expectations and issuing cautious guidance. 

Meanwhile, the defensive consumer staples (-1.4%), health care (-1.0%), and utilities (-0.8%) sectors also lagged amid the rebound across tech names today. 

Outside of the S&P 500, the Russell 2000 (+0.9%) and S&P Mid Cap 400 (+0.8%) outperformed after shrugging off modest early losses of their own. 

Ultimately, today's session underscored the market's resilience to the conflict in Iran, with stocks largely improving throughout the course of the session. President Trump told reporters that the U.S. is ahead of schedule on operations that were initially predicted to last around four to five weeks. JPMorgan Chase CEO Jamie Dimon added commentary of his own in a CNBC interview, stating that if the Iran conflict is not prolonged, there's not going to be a major inflationary impact.

The inflationary effects of higher oil prices could prove to be consequential, particularly as incoming data continue to show firm price pressures beneath the surface. The ISM Manufacturing Index slowed modestly in February but remained in expansion territory, and more notably, the Prices Index accelerated at a faster pace. That pickup is likely to fuel concerns about sticky inflation and reinforce expectations that the Fed will maintain its current policy rate for longer than previously anticipated. In turn, rate-cut expectations have been pushed further out, with the market no longer assigning at least 50% odds to the next cut until the July FOMC meeting, according to the CME FedWatch tool.

U.S. Treasuries began March with a sharp retreat that lifted yields off their lowest levels of the year. The 2-year note yield settled up 11 basis points to 3.49%, and the 10-year note yield settled up nine basis points to 4.05%. 

• S&P Mid Cap 400: +9.1% YTD
• Russell 2000: +7.0% YTD
• DJIA: +1.8% YTD
• S&P 500: +0.5% YTD
• Nasdaq Composite: -2.1% YTD

Reviewing today's data:

• February S&P Global U.S. Manufacturing PMI - Final 51.6; Prior 51.2
• February ISM Manufacturing Index 52.4% (Briefing.com consensus 52.1%); Prior 52.6%
  • The key takeaway from the report is the faster pace of growth in the Prices Index, as that will fuel concerns about sticky inflation pressure (and the Fed sticking with its current policy rate for longer).