Market Wrap 2026-03-12

Market Wrap 2026-03-12

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Today's US Market Wrap — Key Points

• Risk-off sentiment prevails amid rising oil prices and geopolitical tensions.
• US equities decline; energy, utilities, staples sectors outperform.
• Fed rate cut expectations decrease; Dollar strengthens.
• Strait of Hormuz closure and attacks on US bases called for.
• US trade deficit narrows; jobless claims stable.

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MARKET OVERVIEW

• SNAPSHOT: Equities decreased, Treasuries decreased, Crude increased, Dollar increased, Gold decreased.
• REAR VIEW: The new Iranian Supreme Leader stated that the Strait of Hormuz should remain closed and called for attacks on US bases in the region. Fuel tankers were struck in the Gulf. The US President maintained his stance on stopping "evil Empire, Iran." The US administration is reportedly considering suspending the Jones Act to limit oil price increases. Iran's Deputy FM reportedly denied laying mines in the Hormuz Strait. The US is set to release 172 million barrels of crude from its strategic petroleum reserve. Iran stated it is allowing Indian oil tankers to pass through the Strait of Hormuz. US Initial Jobless Claims were unchanged week-over-week, while Continued Claims increased. USTR Greer announced the US is initiating a Section 301 investigation into 16 trading partners.
• COMING UP: Data releases include German Wholesale Prices (Feb), UK Trade Balance (Jan), GDP (Jan), French/Spanish HICP Final (Feb), Canadian Jobs Report (Feb), US Core PCE Price Index (Jan), Durable Goods Orders (Jan), Personal Spending (Jan), JOLTS (Jan), University of Michigan Consumer Sentiment Prelim. (Mar), and Atlanta Fed GDP. Supply events include Japan. Ratings updates are expected from Scope Ratings on the UK and Spain; S&P on Spain; Moody's on Greece and Germany; and Fitch on Spain and Italy.

MARKET WRAP

Trading on Thursday reflected a risk-off sentiment as oil prices rose, with Brent crude settling above USD 100/bbl. The new Supreme Leader Khamenei called for the Strait of Hormuz to remain closed and for attacks on US bases to continue. Navy escorts through the strait may not occur until the end of the month. The US is planning to release 172 million barrels of crude from the SPR, but delivery is expected to take approximately 120 days. Fuel tankers were also struck in the Gulf. The rise in oil prices and geopolitical tensions negatively impacted US equities, with most sectors declining, except for energy, utilities, and staples. Increased oil prices heightened inflation concerns, leading traders to reduce expectations for Federal Reserve rate cuts this year. A 25bps cut is no longer fully priced in, with markets currently implying a 66% probability of such a cut. US jobless claims remained stable, potentially easing concerns following the February NFP report. The Dollar strengthened as rate cut expectations diminished, while cyclical currencies declined as stocks fell. The Yen approached levels that could trigger intervention amid expectations of a more hawkish Fed. Gold and Silver were sold as the Dollar and yields increased, while Bitcoin rose.

US

BALANCE OF TRADE: The US Balance of Trade deficit narrowed in January to 54.4 billion from 70.3 billion, below the expected 68 billion. Imports decreased slightly to 356.6 billion from 357.6 billion, but were above the 351 billion forecast, while exports increased to 302.1 billion from 287.3 billion, exceeding the 286 billion forecast. The increase in exports contributed to the narrower trade deficit. Oxford Economics noted that this was due to an increase in industrial materials, primarily precious metals and capital goods. While total imports decreased, capital goods imports were boosted by ongoing demand for AI-related goods. The firm also stated that January's report suggests net trade will contribute 0.2 percentage points to Q1 growth, which is roughly in line with their baseline forecast.

BUILDING PERMITS/HOUSING STARTS: Building Permits in January fell below expectations to 1.376 million (expected 1.41 million) from December's 1.455 million. Single-family authorizations were 873,000, a decrease of 0.9% month-over-month. Housing Starts increased 7.2% month-over-month to 1.487 million (expected 1.35 million, previous 1.404 million). Single-family housing starts were 935,000, a decrease of 2.8% month-over-month. Oxford Economics anticipates a gradual improvement in housing starts over the course of 2026.

JOBLESS CLAIMS: Initial jobless claims were largely unchanged at 213,000 week-over-week (previous 214,000), slightly below the expected 215,000, and remained within recent ranges. The 4-week average decreased to 212,000 from 215,750. Seasonals expected a decrease of 6,843 week-over-week. Missouri (+3,801) and Virginia (+1,480) saw the largest increases, while New York (-14,360) experienced the largest decline, followed by Michigan (-2,523). Continuing claims for the preceding week were 1.850 million (previous 1.868 million), in line with consensus estimates. Oxford Economics noted that the low and steady level of initial jobless claims suggests the large drop in nonfarm payrolls in February was a blip, not the start of a trend, and that the evidence is consistent with labor market conditions stabilizing before the fallout of the Iran war impacts the economy.

FIXED INCOME

T-NOTE FUTURES (M6) SETTLED 18+ TICKS LOWER AT 111-13

T-notes experienced a bear flattening as oil prices rose back above USD 100/bbl, reducing expectations for Fed rate cuts. At settlement, the 2-year yield increased by 9.8bps to 3.751%, the 3-year yield increased by 9.8bps to 3.770%, the 5-year yield increased by 7.6bps to 3.877%, the 7-year yield increased by 6.2bps to 4.063%, the 10-year yield increased by 4.1bps to 4.269%, the 20-year yield increased by 2.2bps to 4.867%, and the 30-year yield increased by 0.6bps to 4.884%.

THE DAY: T-notes were lower across the curve, with the curve bear flattening as oil prices surged, with Brent settling back above USD 100/bbl as markets priced out Trump's "end of war" comments from earlier in the week. The new Iranian Supreme Leader released his first statement, calling for a continued closure of the Strait of Hormuz and for attacks on all US bases. Energy Secretary Wright warned that ships will not receive military escorts through the strait immediately, but he hopes for it to be in place by month-end. US data showed jobless claims remained low while the trade deficit narrowed due to a jump in exports. The data had little impact, with focus remaining on rising oil prices and the inflationary aspects of the Strait of Hormuz being shut. The fact that jobless claims remain stable could be offsetting some of the labor market concerns seen in the wake of the February NFP. Money markets continued to reduce expectations for Fed rate cuts, with only 17bps of easing priced in this year, implying a 66% probability of just one rate cut. The 30-year auction was solid.

SUPPLY

Notes

• The US sold USD 22 billion of 30-year bonds at a high yield of 4.871%, stopping through the When Issued by 0.7bps. The bid-to-cover ratio fell to 2.45x from 2.66x, but was above the six auction average of 2.39x. Direct demand increased to 27.2% from 24.2%, above the 23.3% average, while indirect demand fell to 63.4% from 69.9%, below the 65.4% average. Dealers were left with a below average 9.4%, but above the prior. Overall, a solid 30-year auction which was better than recent averages but not as strong as the stellar February offering.
• The US will sell USD 13 billion of 20-year bonds on March 17th and USD 19 billion of 10-year TIPS on March 19th; all to settle March 31st.

Bills

• The US sold 4-week bills at a high rate of 3.640%, with a bid-to-cover ratio of 2.77x; and sold 8-week bills at a high rate of 3.625%, with a bid-to-cover ratio of 3.10x.
• The US will sell USD 89 billion of 13-week bills and USD 77 billion of 26-week bills on March 16th, and USD 86 billion of 6-week bills and USD 50 billion of 52-week bills on March 17th; all to settle March 19th.

STIRS/OPERATIONS

• Fed Rate Cut Pricing: March 0bps (previous 0bps), April 0bps (previous 1.7bps), June 4.4bps (previous 7.5bps), December 16.5bps (previous 30.6bps).
• NY Fed RRP op demand was at 0.14 billion (previous 0.55 billion) across 4 counterparties (previous 4) on March 12th.
• SOFR was at 3.64% (previous 3.64%), with volumes at USD 3.175 trillion (previous USD 3.2 trillion) on March 11th.
• EFFR was at 3.64% (previous 3.64%), with volumes at USD 97 billion (previous USD 104 billion) on March 11th.
• US Treasury Buyback [Liquidity Support, 7-10year, max purchase USD 4 billion]: Accepted 55 million of 3.394 billion offers; accepted 3 issues of 10 eligible.

CRUDE

WTI (J6) SETTLED USD 8.48 HIGHER AT 95.73/BBL; BRENT (K6) SETTLED USD 8.48 HIGHER AT 100.46/BBL

The crude complex was bid amid no signs of de-escalation in the Middle Eastern war. Focus remains on the Strait of Hormuz closure, with the first statement from the new Iranian Supreme Leader stating that the closure should be continued as a tool to pressure the enemy, with further oil upside seen as he said other fronts will be opened if war persists. Before this, oil saw another bullish move after comments from Energy Secretary Wright, noting the Navy escort will happen relatively soon, but it cannot happen right now, and that the SPR release of 172 million bbls will need to be repaid, albeit with interest to return 200 million bbls back to the SPR within a year, which in turn will see more oil on the market in the short term, but the net impact is a tighter market by c. 28 million bbls in the long run. Prior to all this, and in overnight trade, the complex was buoyed by further Iranian attacks on tankers in the Strait. While WTI and Brent was up for the duration of the session and hitting peaks of USD 97.19/bbl and 101.59/bbl, respectively, it did pare some of the gains on a couple of bearish headlines; 1) Trump's admin is reportedly set to suspend the Jones Act to curb oil price increases, and 2) Iran Deputy FM said they are not laying mines in Hormuz Strait and Iran allowed some ships to cross strait. Eyes are also on the Israel/Lebanon border amid reports Israel is considering a ground invasion while tanks are being moved to the border.

EQUITIES

CLOSES : SPX -1.52% at 6,673, NDX -1.73% at 24,534, DJI -1.56% at 46,678, RUT -2.12% at 2,489

SECTORS: Industrials -2.52%, Consumer Discretionary -2.21%, Health -1.76%, Technology -1.72%, Communication Services -1.63%, Financials -1.62%, Real Estate -0.63%, Materials -0.36%, Consumer Staples +0.09%, Utilities +0.73%, Energy +0.98%.

EUROPEAN CLOSES: Euro Stoxx 50 -0.69% at 5,755, Dax 40 +0.06% at 23,601, FTSE 100 -0.44% at 10,309, CAC 40 -0.71% at 7,984, FTSE MIB -0.64% at 44,488, IBEX 35 -1.20% at 17,144, PSI +0.83% at 9,152, SMI -0.56% at 12,850, AEX -0.23% at 1,001.

STOCK SPECIFICS:

• Fertilizer companies continued to increase amid supply disruptions, including CF Industries (CF) and Mosaic (MOS).
• Atlassian (TEAM) will eliminate approximately 10% of its workforce.
• Occidental (OXY) received a double upgrade at Wells Fargo.
• TE Connectivity (TEL) authorized a $3 billion increase to its share repurchase program and raised its quarterly dividend by 10% to $0.78 per share.
• Palantir (PLTR) is partnering with NVDA to deliver a sovereign AI operating system reference architecture.
• Eli Lilly (LLY) compounded weight-loss drugs that contain vitamin B12 and the main ingredient in Lilly's Zepbound could present health risks due to impurity.
• GlobalFoundries (GFS) priced a 20 million share secondary offering at $42.00 per share.
• Dollar General (DG): FY SSS guidance is slightly light.
• Morgan Stanley (MS) capped redemptions from one of its private credit funds, returning less than half of the capital that investors sought to cash out.
• Wolfpack is short Babcock & Wilcox Enterprises (BW).

FX

The Dollar Index reached a new year-to-date high of 99.750 as Brent crude briefly regained the USD 100/bbl level after the Iranian leader advocated for the Strait of Hormuz to remain closed, while remarks from US President Trump showed little effort to calm tensions. Yields across the curve rose for their third consecutive day as money markets responded to rallying energy prices, now no longer fully pricing in a 25bps Fed rate cut by year-end. Data had little bearing on FX movement with Initial Jobless Claims unchanged at 213k while continuing claims rose above expectations, yet remain sticky within YTD ranges.

Antipodean currencies were at the bottom of the G10 pile on Thursday, with growing hawkish RBA bets failing to offset the continued risk-off sentiment, which has finally caught up with AUD, leaving the currency snapping its 3-day outperformance.

USD/JPY trades around intraday peaks of 159.42, eyeing the multi-year high of 161.95, meaning FX intervention is likely to become a just as common topic of conversation as surging energy prices from the Middle East. That said, Japan's heavy reliance on oil imports would suggest that FX intervention would have less of an impact in other environments, and as such, is less likely to occur.

TRY: The CBRT held the rates at 37% as expected. The Central Bank noted that the tight monetary policy stance will be maintained until price stability is achieved.