Weekly Recap:

by Eric Criscuolo & Michael Reinking, CFA

Published on 3/20/26

Escalation and Uncertainty. Those two words are the driving forces in markets right now. This week the war with Iran escalated to include strikes on vital energy infrastructure. Iran’s South Pars natural gas field- the biggest source of Iran’s domestic energy- was struck. Iran responded with attacks on refineries in Saudi Arabia and Kuwait as well as Qatar’s giant Ras Laffan, the world’s largest liquified natural gas plant. Beyond this escalation, there were reports that the US was considering deploying thousands of US forces to the Middle East. Those reports gained momentum today. Defense Secretary Pete Hegseth held a press conference in which he said no time has been set for ending the conflict. Most importantly however, six service members who were killed in the conflict were honored. To quote retired Navy SEAL Jocko Willink, “War…is a nightmare.”

As sobering as that was, our job here is to write about financial markets. So, we’ll continue with what transpired across them this week. With Escalation checked off, we move to Uncertainty. There were at least half a dozen central banks that held their policy rate meetings this week, with the Federal Reserve the highlight. You can read our recap here. The Fed held the policy rate unchanged as expected, but the details of the vote, committee projections and Chair Powell’s commentary tilted everything hawkish. Short term yields ripped higher, removing a tailwind for equities. Powell pulled out his most cited word- Uncertainty- and all its synonyms, to describe the current situation. Remember he has been Fed Chair through COVID, Tariffs and now Iran. We’ll discuss more a bit later. 

Equities were absolutely under pressure but exhibited some resiliency early on. The S&P was down less than 0.5% for the week coming into Friday, and down about 4% on the year. However, the foundations were stressed. We had already broken below the bottom end of the 6700-7000 trading range we’d been in since November. Late in the day on Thursday Israeli PM Netanyahu said that Iran no longer has the ability to enrich uranium or produce ballistic missiles- flagging a potential off-ramp or de-escalation- and that Israel will not target energy infrastructure going forward. The S&P, down 0.8% at the time, shot into positive territory briefly before pulling back to finish down 0.3%. However, we closed below the important 200 day moving average for the first time since May, over 200 days.  

On a positive note, we’ll give out a shout out to Friend of the MAC Desk Jay Woods at Freedom Capital, who mentioned that 71% of the time when the S&P breaks below the 200 day after spending at least 200 days above it, our current situation, it recaptures that average within 10 days, with the largest drawdown being only 3%.

That still may happen but Friday’s action put us in a bit of a deeper hole. Hit by headwinds from all sides, it was also a huge triple-witching opex, exacerbating volatility, but also making the first day of Spring a lot more exciting. The S&P 500 started out of the gate slightly lower but quickly fell to 6540, testing the double lows in October and November. That held for awhile, until wavering before news that the US is preparing for potential ground troops in Iran sent us below 6500, though we managed to regain that level- barely- at the Close. Speaking of, it was a record breaker. 3.57B shares and $230.5B notional was traded in the NYSE Closing Auction.  

The S&P ended the week down 2%. It’s the fourth straight weekly decline and ninth in twelve. The weakness was broadly dispersed but the equal-weight slightly outperformed as did small and mid caps. Two standouts for both ends of performance: the Dow Transports rose almost 1%, while the NYSE FANG+ fell 3%, lagging the overall market. Transports saw mixed performance from Airlines despite the obvious fuel and demand concerns, with strong guidance from Delta serving as the source of strength. FedEx also saw gains after a strong earnings print. FANG+ saw weakness across constituents- NVDA, MSFT, META down 4%, CrowdStrike down 8%, giving back some of its recent sharp gains. 

It’s no surprise that Energy led this week, putting YTD gains at over 30%. Financials was the only other sector to end in the green. Both regional and large banks stayed away from large declines on Friday. Regulators proposed easing capital requirement rules in place since 2008. That could make it easier for banks to re-engage in lending to areas it ceded to non-bank institutions. Credit names swung between gains and losses generally, but Apollo, Blackstone and Blue Owl ended the week up 3-7%.

Tech was about flat heading into Friday before selling off. The ICE Semis index ended modestly higher. Micron had an absolute blow out earnings report, but the stock fell 4%, then another 5% Friday, much like we saw happen to Nvidia. The hurdle rates are in the stratosphere for some of these names, which adds further pressure on the market as paths for mega cap gains appear cut off.   

Yield proxies came under fire, especially to close the week. Utilities and Real Estate lagged and led the decliners on Friday with yields jumping. They’ve been outperformers this year, so stood to be a source of funds. Consumer Staples didn’t hold up as a Defensive play as it was among the worst performers. Ag names were hit (ADM -8%, BG -5%). Political pressure on processed foods and GLP trends continue to act as weights on the sector. Materials sold off across the board, with rising input/energy costs a focus, while miners were under pressure as metals sold off- especially gold. 

Global Equities - Europe hit the most  

Among the hawkish changes from the Fed meeting was Governor Waller changing his vote from being in favor of a rate cut last time, to voting for no change this time, the composition of the SEP and Powell's focus on curbing inflation in the Q&A. Markets responded by driving yields higher and stocks lower, increasing the weakness that equities were under leading into the event. There has been a complete repricing of Fed expectations. Rate hikes have now made an appearance. A month ago there were 60bps of cuts priced in for the rest of the year, with almost no expectation that rates would be unchanged by December. Now there's a 60% expectation that rates will be unchanged, and a little less than 10bp of rate HIKES.  

Spiking oil and gas prices would lead to nearer-term inflation. The impact could be even more pronounced, since the consumer has already been struggling with inflation since COVID. That brings up the second-order effect: when will those higher prices create demand destruction that could trigger a recession, in which markets are then repricing the yield curve back down, as we switch to rate cuts to spur growth, and not hikes to tame inflation. As Powell said, “we just don’t know.”

It wasn’t just the Fed meeting this week. The BOJ, ECB, BOE, Riksbank, SNB and several other central banks held meetings. Like the Fed meeting, it was the commentary and underlying factors that mattered more than the actual decisions, which saw all those banks hold rates steady. The BOE generated the most impact on a market basis. The central bank saw its first unanimous vote since September 2021.  That was much different than the divided 5-4 vote to maintain at the prior meeting as the bank’s inflation concern moved to the front. BOE governor Carney put it bluntly- “Whatever happens, our job is to make sure inflation gets back to its 2% target.”  The ECB also had a unanimous vote and noted its determination to ensure inflation stabilizes at 2% in the medium term. UK yields skyrocketed. More on that below.

The rest of the US data this week was moderately impactful. February PPI came in hot with headline and core up 3.4% and 3.9% on an annual basis versus expectations of 2.9% and 3.7% respectively. The month/month reading increased for the fourth straight print. Ex-food and energy rose 0.5% month/month, versus 0.8% last month. 

Goods rose 1.1%- the largest increase since August 2.3%, with Foods and Energy both up over 2% to drive the total. There was some outlier internals that moved the index. Over 20% of the Goods increase was due to a ~50% increase in vegetables. We also haven’t tamed the egg inflation beast just yet as prices jumped over 90% after declining 64% last month. Goods ex-Food and Energy was a more modest 0.3%. Services PPI rose 0.5%. 20% of that was from a jump in travel accommodations.

Weekly jobless claims continued the Low Hire / Low Fire theme, coming in at 205k, below last week and consensus. ADP Weekly employment showed 9k private jobs/week were added over the prior four weeks, down from last week’s 14.75k.

The Census Bureau had some tough news for housing when its New Home Sales report fell to 587k in January, down from 712k in December and the lowest since October 2022. Pending Home sales data was rosier rising 1.8% in February versus January, stopping two straight months of declines and above expectations of -0.5%.  

The Empire manufacturing survey showed there was little change in business conditions (-0.2) in New York in March versus February, after printing 7.1 last month and was below estimates. New Orders ticked slightly higher and Prices Paid moderated but remain elevated.

The Philly Fed Manufacturing Index rose from 16.3 to 18.1 in March. New Orders fell modestly and Prices Paid and Received increased. Firms remain optimistic about future activity. 

Short-term Treasury yields started the week by moving lower but ripped higher on all the central bank news. The 2-year was up over 15bp this week to about 3.90%, but the yield curve Bear Flattened as 10yrs rose  10bp and 30yrs rose just 3bp. The US moves are at least partially in response to much bigger international moves. 2yr yields in the UK reached the moon before NASA’s upcoming Artemis launch, flying ~50bp this week as BOE policy expectations got completely repriced for inflation fears, as positioning was way offsides on bets for further rate cuts this year.

Lower longer-term inflation expectations and/or rising growth concerns are keeping the longer tenors more in check. Fed Chair Powell has been disussing the dual-mandate tension that the Fed has been navigating. Now there’s a new tension, or tipping point: When energy price inflation transforms into demand destruction and triggers a recession. Longer-term inflation expectations have been “well anchored” for a while, but at least one measure is moving higher- 5-year breakevens.

The US Dollar Index made a run at 100 at the start of the week but didn't hold it. Yield differentials are providing some support to some to other currencies versus the Dollar following the global yield spike.

Iran headlines will again be the driver. Putting that aside for now, Baseball is back, and the New York Yankees and their former neighbor, the San Francisco Giants, kick off the 2026 season next Wednesday, March 25 on Opening Night, the earliest opener in league history. For those that like brackets, the NCAA basketball tournaments will be in full swing. Already had some crazy moments.

The Fed’s media blackout is over, so we’ll hear a lot of discussion about each members outlook and reasoning. Flash PMIs for March will be released, which should include events after the war with Iran started. Earnings will include KB Home, Paychex, Winnebago, Jefferies and Carnival. Have a great weekend and enjoy Spring!   

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