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Middle East Conflict and Rising Energy Prices Weigh on Market Sentiment
Major stock indexes finished the volatile week lower as investors digested escalating conflict in the Middle East following U.S. and Israeli military strikes on Iran, rising energy-driven inflation risks, and mixed economic data. Global equities, as measured by the MSCI ACWI, declined 3.70% for the week, while domestic large-cap stocks, measured by the S&P 500, fell 1.99%. International equities saw the largest declines, dropping more than 6.5% for the week, as rising energy prices and concerns surrounding the closure of the Strait of Hormuz weighed more heavily on those markets.
Energy Prices Rise Due to Conflict
Escalating military conflict across the Middle East reverberated through energy markets, pushing oil prices to their highest levels since September 2023. With shipments through the Persian Gulf’s Strait of Hormuz sharply curtailed, U.S. crude climbed to roughly $91 per barrel late Friday, up from about $67 the prior week.
Labor Market Sends Mixed Signals
Labor market data during the week painted a mixed picture, as ADP reported that private-sector employment rose by 63,000 jobs in February, the strongest monthly gain since November and ahead of expectations, while jobless claims remained steady at 213,000 and announced layoffs declined sharply. However, sentiment shifted later in the week after the Bureau of Labor Statistics reported that nonfarm payrolls fell by 92,000 in February, well below forecasts for a gain of about 60,000, and the unemployment rate edged up to 4.4%.
Q4 Earnings Recap
S&P 500 companies capped the fourth quarter earnings season with a robust 14% year over year profit increase, marking the fifth straight quarter of double digit growth. Information technology was the clear standout, delivering a powerful 33% earnings gain and leading all 11 sectors, underscoring how much market earnings momentum continues to be driven by tech leadership
Looking Ahead
Inflation data will remain in focus in the week ahead, with a Consumer Price Index report due Wednesday and the Personal Consumption Expenditures Price Index scheduled for Friday, which could help clarify recent mixed signals. The latest CPI reading showed inflation easing to a 2.4% annual rate, while the most recent PCE report indicated a higher 2.9% pace, reflecting the fastest price growth in nearly a year.
As Always
I’d like to leave you with the final line we’ve used since we started these commentaries back at the very height of market volatility in March 2020. Always remember that we create financial/investment plans not for the easy times, but to prepare for the tough ones.
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