The S&P 500 Index ($SPX) (SPY) on Wednesday closed up +0.78%, the Dow Jones Industrial Average ($DOWI) (DIA) closed up +0.49%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +1.51%.  March E-mini S&P futures (ESH26) rose +0.77%, and March E-mini Nasdaq futures (NQH26) rose +1.53%.

Stock indexes rallied on Wednesday as signs of US economic resilience and cooling inflationary pressures outweighed concerns about the Iran war.  The US labor market continues to grow after the Feb ADP employment report showed employers added more jobs than expected.  Also, the US service economy expanded at the fastest pace in 3.5 years last month, while service price pressures fell to an 11-month low.

Stocks also found support on Wednesday on hopes that the Iran conflict could end sooner than expected.  The NY Times reported that operatives from Iran’s Ministry of Intelligence used backchannels to contact the CIA a day after US-Israeli attacks began. However, Iran’s semi-official Tasnim news agency called the report “pure falsehood and psychological warfare.”

Stock gains were limited amid heightened global trade tensions after Treasury Secretary Scott Bessent said proposed 15% tariffs on goods imported into the US may take effect this week.

Crude oil prices briefly fell from sharp overnight gains on Wednesday after a NY Times report said that Iranian operatives made an offer to the US to discuss terms for ending the conflict.  Crude oil prices were also undercut by carryover from Tuesday, when President Trump said the US will ensure the free flow of energy through the Strait of Hormuz with insurance guarantees and even naval escorts. 

However, crude prices rose by more than 1% on Wednesday as the Strait of Hormuz remains closed, halting most energy shipments from the Persian Gulf.  Iran's Islamic Revolutionary Guard Corps has warned ships not to sail through the passageway, saying that vessels "could be at risk from missiles or rogue drones."  The closure of the Strait of Hormuz, which handles a fifth of the world's oil, has forced Gulf producers unable to export their oil to stockpile the crude in storage tanks.  Iraq, OPEC's second-largest producer, shut down oil production at its largest oil fields in Rumalia as storage tanks filled up.  Also, Kayrros reported on Wednesday that four of six tanks at Saudi Arabia's Ras Tanura refinery were full, and the Ju'aymah terminal on the country's east coast is quickly running out of spare capacity.  Goldman Sachs estimates the real-time risk premium for crude oil at $18/bbl, corresponding to its estimate of the impact of a six-week full halt to tanker traffic in the Strait of Hormuz. 

In addition, damage from an intercepted Iranian drone caused a major fire on Tuesday at the United Arab Emirates' major oil-trading hub, Fujairah, one of the largest oil storage centers in the Middle East.  European natural gas prices surged to a 3-year high on Tuesday after Qatar shut its Ras Laffan plant, the world's largest natural gas export facility, after it was targeted by an Iranian drone attack.  The Ras Laffan plant accounts for about 20% of the global liquefied natural gas supply.

US MBA mortgage applications rose by +11% in the week ended February 27, with the purchase mortgage sub-index up +6.1% and the refinance mortgage sub-index up +14.3%.  The average 30-year fixed rate mortgage was unchanged from the prior week at 6.09%.

US Feb ADP employment increased by +63,000, stronger than expectations of +50,000.

The US Feb ISM services index unexpectedly rose +2.3 to 56.1, better than expectations of a decline to 53.5 and the strongest pace of expansion in 3.5 years.  The Feb ISM services prices paid sub-index unexpectedly fell -3.6 to an 11-month low of 63.0, weaker than expectations of an increase to 68.3.

The Fed Beige Book said that for the period ending February 23, seven of the twelve Fed districts reported that economic activity increased at a slight to moderate pace, with prices increasing moderately and employment levels generally stable.

Comments on Wednesday from Cleveland Fed President Beth Hammack were hawkish, with Hammack saying it's important to drive inflation back to target and that "Fed policy could be on hold for quite some time." 

This week's market focus will be on US-Iran war news, corporate earnings, and economic news.  On Thursday, weekly initial unemployment claims are expected to increase by +3,000 to 215,000.  Also, Q4 nonfarm productivity is expected to be up +1.9%, and Q4 unit labor costs are expected to be up +2.0%.  On Friday, Feb nonfarm payrolls are expected to increase by +60,000, and the Feb unemployment rate is expected to remain unchanged at 4.3%.  Also, Feb average hourly earnings are expected to increase by +0.3% m/m and +3.7% y/y.  In addition, Feb retail sales are expected to fall -0.3% m/m and Feb retail sales ex-autos are expected to remain unchanged m/m.

Q4 earnings season is nearing its end, with more than 90% of the S&P 500 companies having reported earnings results.  Earnings have been a positive factor for stocks, with 73% of the 481 S&P 500 companies that have reported beating expectations.  According to Bloomberg Intelligence, S&P earnings growth is expected to climb by +8.4% in Q4, marking the tenth consecutive quarter of year-over-year growth.  Excluding the Magnificent Seven megacap technology stocks, Q4 earnings are expected to increase by +4.6%.

The markets are discounting a 4% chance for a -25 bp rate cut at the next policy meeting on March 17-18.

Overseas stock markets settled mixed on Wednesday.  The Euro Stoxx 50 closed up +1.72%.  China’s Shanghai Composite fell to a 3.5-week low and closed down -0.98%.  Japan’s Nikkei Stock 225 dropped to a 3.5-week low and closed down -3.61%.

Interest Rates

June 10-year T-notes (ZNM6) on Wednesday closed down by -6.5 ticks.  The 10-year T-note yield rose +2.2 bp to 4.081%.  Wednesday’s stock rally reduced safe-haven demand for government debt, weighing on T-notes.  Also, Wednesday’s stronger-than-expected reports on Feb ADP employment and Feb ISM services were bearish for T-notes.  In addition, hawkish comments on Wednesday from Cleveland Fed President Beth Hammack undermined T-notes when she said, "Fed policy could be on hold for quite some time."  Losses in T-notes were limited after the Feb ISM services prices paid sub-index unexpectedly fell to an 11-month low, a supportive factor for T-notes. 

European government bond yields moved lower on Wednesday.  The 10-year German bund yield fell -0.2 bp to 2.750%.  The 10-year UK gilt yield fell -3.0 bp to 4.411%.

Eurozone Jan PPI rose +0.7% m/m and fell -2.1% y/y, stronger than expectations of +0.2% m/m and -2.6% y/y.

The Eurozone Jan unemployment rate fell -0.2 to a record low of 6.1%, showing a stronger labor market than expectations of 6.2%.

Swaps are discounting a 2% chance of a -25 bp rate hike by the ECB at its next policy meeting on March 19.

US Stock Movers

Chipmakers and AI-infrastructure stocks moved higher on Wednesday, supporting gains in the broader market.  Advanced Micro Devices (AMD), Intel (INTC), and Micron Technology (MU) closed up more than +5%, and Seagate Technology Holdings Plc (STX) and Western Digital (WDC) closed up more than +4%.  Also, ASML Holding Plc (ASML), ARM Holdings Plc (ARM), KLA Corp (KLAC), and Lam Research (LRCX) closed up more than +2%.  In addition, Nvidia (NVDA), Applied Materials (AMAT), and Broadcom (AVGO) closed up more than +1%.

Cryptocurrency-exposed stocks rallied on Wednesday as Bitcoin (^BTCUSD) surged more than +7% to a 3.5-week high.  Galaxy Digital Holdings (GLXY) closed up more than +17%, and Coinbase Global (COIN) closed up more than +14%.  Also, Strategy (MSTR) closed up more than +10% to lead gainers in the Nasdaq 100.  In addition, Riot Platforms (RIOT) closed up more than +8%, and MARA Holdings (MARA) closed up more than +7%. 

Energy producers and energy service providers were under pressure on Wednesday, giving back some of this week’s sharp gains.  Baker Hughes (BKR) closed down more than -2% to lead losers in the Nasdaq 100.  Also, APA Corp (APA), ConocoPhillips (COP), and Halliburton (HAL) closed down more than -2%.  In addition, Devon Energy (DVN), Exxon Mobil (XOM), Chevron (CVX), and SLB Ltd (SLB) closed down more than -1%. 

Moderna (MRNA) closed up more than +15% to lead gainers in the S&P 500 after it agreed to pay Genevant $950 million to settle litigation related to the delivery technology behind its Covid shot, a deal some analysts said was better than feared. 

Ross Stores (ROST) closed up more than +8% after reporting Q4 sales of $6.64 billion, better than the consensus of $6.40 billion. 

LyondellBasell Industries NV (LYB) closed up more than +6% after KeyBanc Capital Markets upgraded the stock to overweight from sector weight with a price target of $73.

nLight Inc. (LASR) closed up more than +6% after Baird initiated coverage on the stock with a recommendation of outperform and a price target of $95.

Dow Inc. (DOW) closed up more than +5% after KeyBanc Capital Markets upgraded the stock to overweight from sector weight with a price target of $38. 

Webtoon Entertainment (WBTN) closed down more than -9% after reporting Q4 EPS loss of -$2.36, a much wider loss than the consensus of -12 cents. 

Brown-Forman (BF.B) closed down more than -6% to lead losers in the S&P 500 despite reporting better-than-expected Q3 net sales after saying on an earnings call that it sees a “two-year headwind” on costs and gross margin.

Gitlab (GTLB) closed down more than -6% after forecasting 2027 revenue of $1.10 billion to $1.12 billion, the midpoint below the consensus of $1.12 billion. 

Abercrombie & Fitch (ANF) closed down more than -3% after forecasting Q1 net sales to grow +1% to +3%, below the consensus of +4.5%.

Frontline Plc (FRO) closed down more than -2% after Arctic Securities ASA downgraded the stock to hold from buy. 

Earnings Reports(3/5/2026)

BJ's Wholesale Club Holdings Inc (BJ), Burlington Stores Inc (BURL), Ciena Corp (CIEN), Cooper Cos Inc/The (COO), Costco Wholesale Corp (COST), Gap Inc/The (GAP), Guidewire Software Inc (GWRE), Kroger Co/The (KR), Marvell Technology Inc (MRVL), Samsara Inc (IOT), Toro Co/The (TTC).