Market Wrap 2026-03-01

Market Wrap 2026-03-01

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Today's US Market Wrap — Key Points

• Equities declined amid credit & geopolitical risks, recovering some losses. Mixed sector performance; Energy outperformed.
• Treasuries rallied on geopolitical tensions & private credit concerns. Strong PPI data, but inflation fears remained contained.
• Crude oil rose due to US/Iran tensions. Trump's comments added uncertainty. Focus shifts to upcoming US payrolls report.
• Dollar weakened despite strong PPI, as safe-haven flows favored CHF. PBoC cut FX Risk Reserve Ratio, impacting USD/CNH.

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MARKET SNAPSHOT

• Equities: Down
• Treasuries: Up
• Crude: Up
• Dollar: Down
• Gold: Up

REAR VIEW

• Trump stated he is undecided on Iran and is not satisfied with their negotiation tactics.
• US Core and Headline PPI figures were higher than anticipated.
• French and Spanish Preliminary CPI data exceeded expectations, while German State CPI data was weaker than expected.
• The PBoC will reduce the FX Risk Reserve Ratio for forward FX sales.
• NFLX withdrew from the WBD deal; PSKY was the winning bidder.

COMING UP

• Data releases: German Retail Sales (Jan), EZ/UK/US Final Manufacturing PMIs (Feb), US ISM Manufacturing PMI (Feb), Chinese RatingDog Manufacturing PMI (Feb), Japanese Unemployment Rate (Jan).
• Speeches: BoJ's Himino; BoE’s Taylor, Ramsden; BoC’s Kozicki, Macklem.
• Earnings: Riot Platforms, Norwegian Cruise Line, ASM International.

WEEK AHEAD

• Key events include US NFP, Retail Sales, ISM PMIs, OPEC meeting, EZ Flash HICP, ECB Minutes, and Australian GDP.

CENTRAL BANK WEEKLY

• Preview of ECB Minutes; Review of PBoC LPR and BoK decisions.

WEEKLY US EARNINGS ESTIMATES

• Earnings season is slowing down, with notable reports from TGT, CRWD, AVGO, and COST.

MARKET WRAP

US stock indices declined on Friday, influenced by credit risk and geopolitical tensions, but recovered some losses near the close. Sector performance was mixed, with Financials underperforming due to ongoing concerns about private credit following the MFS collapse, which impacted several US financial institutions, including Wells Fargo, Apollo, and Jefferies. These concerns may be driving a shift from corporate credit to safer government debt, supporting gains in US Treasuries as expectations for Fed rate cuts in 2026 diminished. Energy was the top-performing sector, boosted by rising WTI and Brent crude prices amid US/Iran tensions. Despite positive talks between Oman and Iran, Trump's recent comments indicated uncertainty about a decision on Iran and dissatisfaction with their negotiation methods. In FX markets, the Swiss franc strengthened due to safe-haven demand, along with higher gold prices, while the Yen's gains were limited, possibly due to recent BoJ board nominations suggesting a continuation of looser monetary policy in the near term. US PPI data was stronger than expected, but inflation fears did not intensify, potentially due to softer PCE components within the report. Market participants will monitor geopolitical developments over the weekend ahead of the US payrolls report next Friday.

US

PPI:

• Headline and core PPI figures exceeded expectations in January.
• The headline M/M increased by 0.5%, surpassing the 0.3% forecast and accelerating from the previous 0.4%. The Y/Y rose 2.9%, down from 3.0% previously but above the 2.6% forecast.
• Core PPI surged 0.8% M/M, exceeding the 0.3% forecast and the prior 0.6%, while the Y/Y rose 3.6%, up from 3.3% previously and the 3.0% forecast.
• Despite the strong core metrics, inflation concerns did not escalate, possibly due to softer PCE components in the report.
• Portfolio management and domestic air passenger transport fees decreased, while in healthcare, physician care costs increased, but other components were little changed or decreased, with hospital outpatient care declining 0.86% from the prior 0.02%.
• Pantheon Macroeconomics noted that the upside was driven by a 2.5% increase in trade services prices, reversing the squeeze in H2 of 2025.
• They estimate that PPI and CPI data indicate a 0.27% increase in the Core PCE deflator for January, and 2.9% Y/Y, down from 3.0% in December.
• Pantheon Macroeconomics anticipates relatively stable inflation over the next four months, with core PCE expected to decline sharply from June, ending the year slightly above the 2% target.

FIXED INCOME

T-NOTE FUTURES (H6) SETTLED 14 TICKS HIGHER AT 113-27+

• T-notes rallied due to geopolitical risk and corporate credit concerns.
• At settlement: 2-year -5.3bps at 3.379%, 3-year −6.2bps at 3.382%, 5-year 5.3bps at 3.512%, 7-year −5bps at 3.719%, 10-year −4.2bps at 3.962%, 20-year −2.9bps at 4.571%, 30-year −2.4ps at 4.634%.

THE DAY:

• T-notes traded sideways overnight before increasing throughout the European morning and US session.
• The upside was driven by geopolitical tensions related to potential US action against Iran.
• Despite positive talks between Oman and Iran, the US has remained silent, and Trump indicated uncertainty about a decision on Iran and dissatisfaction with their negotiation methods.
• Embassies are being evacuated in the Middle East, raising fears of a potential strike.
• Private credit concerns persisted, with financials declining after the MFS collapse impacted several US financial institutions.
• Ongoing private credit concerns may be prompting a shift from corporate credit to safer government debt, supporting US T-notes.
• The PPI report was strong, driven by a jump in trade price services, while PCE components were less concerning.
• Pantheon Macroeconomics expects the Core PCE deflator at 0.3%, with the Y/Y at 2.9%, down from 3.0% in December.

SUPPLY

Bills

• The US will sell USD 77bln of 26-week bills and USD 89bln of 13-week bills on March 2nd and USD 90bln on March 3rd, all settling on March 5th.

Notes

STIRS/OPERATIONS

• Market Implied Fed Rate Cut Pricing: March 0bps, April 5.2bps, June 15.1bps, December 61.2bps.
• NY Fed RRP op demand at USD 16.32bln across 10 counterparties.
• SOFR at 3.67%, volumes at USD 3.262tln on February 26th.
• EFFR at 3.64%, volumes at USD 108bln on February 26th.

CRUDE

WTI (J6) SETTLED USD 1.82 HIGHER AT 67.02/BBL; BRENT (K6) SETTLED USD 2.03 HIGHER AT 72.87/BBL

• Crude oil prices increased due to ongoing concerns about escalating tensions between Iran and the US.
• Negotiations concluded without an agreement, but both sides agreed to continue technical discussions.
• Mediators noted "unprecedented openness" and narrowing gaps on nuclear limits and sanctions relief, but key sticking points remain.
• Trump stated he hasn't made a decision on Iran and is not satisfied with their negotiation methods, but indicated additional talks.
• He reiterated his desire for a deal and the prevention of Iran acquiring nuclear weapons, and when asked about military force, he stated he doesn't want to, but sometimes it is necessary.
• The lack of agreement and ongoing geopolitical uncertainty supported crude prices, with some anticipating potential US action this weekend.
• Polymarket currently estimates a 26% chance of the US striking Iran by March 2nd.
• The weekly Baker Hughes rig count showed a decrease of 2 oil rigs to 407, an increase of 1 natural gas rig to 134, resulting in a total decrease of 1 rig to 550.
• WTI traded between USD 64.85-67.83/bbl and Brent between USD 70.42-73.54/bbl.

EQUITIES

CLOSES: SPX -0.43% at 6,879, NDX -0.30% at 24,960, DJI -1.05% at 48,977, RUT -1.68% at 2,632

SECTORS: Technology -2.17%, Financials -1.99%, Consumer Discretionary +0.03%, Industrials +0.23%, Real Estate +0.50%, Materials +0.80%, Utilities +1.07%, Communication Services +1.44%, Consumer Staples +1.51%, Energy +1.68%, Health +1.77%.

EUROPEAN CLOSES: Euro Stoxx 50 -0.51% at 6,130, Dax 40 +0.09% at 25,312, FTSE 100 +0.59% at 10,911, CAC 40 -0.47% at 8,581, FTSE MIB -0.46% at 47,210, IBEX 35 -0.73% at 18,361, PSI +0.09% at 9,276, SMI +0.94% at 14,045, AEX +0.45% at 1,027

STOCK SPECIFICS:

• Meta (META): Agreed to a multi-year deal worth billions of dollars to rent Google’s tensor processing units; previously scrapped its most advanced internally developed AI training chip.
• Block (XYZ): Reduced its workforce by >40% due to a strategic shift towards AI and raised FY guidance.
• Dell (DELL): Reported strong Q4 results and guidance, driven by increased AI server demand and a growing backlog.
• Netflix (NFLX) declined to match Paramount Skydance's (PSKY) revised $31/shr all-cash offer for Warner Bros. Discovery (WBD), withdrawing from its previous $27.75/shr agreement.
• Intuit (INTU): Reported better-than-expected profit and revenue but issued a disappointing outlook.
• Zscaler (ZS): Guidance disappointed investor expectations.
• CoreWeave (CRWV): Reported a larger loss per share than expected with weak next quarter revenue guidance.
• Flutter (FLUT): Revenue was light with an underwhelming FY outlook.
• Duolingo (DUOL): Reported weak quarterly numbers and guidance amid a strategic shift towards faster user growth, which will impact bookings growth and profitability.
• Hunterbrook Research has a short position on Hercules Capital (HTGC).
• Caesars (CZR) stated that early talks are focused on select assets, not a full sale.

FX

The USD was generally weaker against major currencies as a strong PPI report was overshadowed by a decline in US yields due to flight-to-safety buying amid credit concerns, although the USD failed to capitalize on its typical safe-haven status given increased bets on rate cuts in 2026. The Financials ETF XLF, initially resilient to credit concerns stemming from the UK lender MFS's collapse, declined alongside a further increase in credit spreads. Geopolitical concerns remain elevated ahead of the weekend, with Trump's comments doing little to alleviate those fears. The PPI report was strong on both headline and core measures, with the Core M/M printing 0.8% in January, above the expected 0.3%, although components that feed into PCE showed little concern.

The CHF led G10 gains, supported by risk aversion and higher gold prices, while the GBP lagged, unaffected by the Labour Party's loss in the Gorton & Denton by-election. USD/CHF traded around 0.7680, down from last Friday's close of 0.7772, while EUR/CHF hit new yearly lows of 0.9061. The EUR/USD initially moved higher above 1.1800 on stronger-than-expected French and Spanish inflation, but the move faded after weaker-than-expected German State CPI data suggested a softer national print.

The JPY was marginally stronger against the USD, although upside was potentially limited by recent nominations for the BoJ board, which are viewed as signaling looser policy in the short term. Tokyo CPI core inflation slipped below the BoJ’s target but was 1.8% Y/Y, above the forecasted 1.7%.

USD/CNH weakened following the PBoC's decision to cut the FX Risk Reserve Ratio for forward FX sales to 0% from 20%, effective March 2nd, to promote FX market development and support corporate exchange rate risk management. USD/CNH reached highs of 6.8699 but later trimmed to 6.8590, still above the 6.8400 level prior to the PBoC announcement.