Stocks Settle Lower as Iran War Boosts Crude Oil and Bond Yields

Economic Indicators - Q4 nonfarm productivity remained unchanged at +1.8%, while Q4 unit labor costs were revised upward to +4.4% from +2.8%, exceeding expectations of +3.6% [1] - The March S&P manufacturing PMI unexpectedly rose by +0.8 to 52.4, contrary to expectations of a decline to 51.5 [1] - The March Richmond Fed manufacturing survey of current conditions increased by +10 to a 13-month high of 0, surpassing expectations of -8 [1] Market Reactions - Stocks experienced a decline on Tuesday, with the S&P 500 Index closing down -0.37%, the Dow Jones Industrial Average down -0.18%, and the Nasdaq 100 Index down -0.77% [5] - Energy producers saw gains as WTI crude oil prices rose more than +4%, which helped limit the downside in stocks [4][15] - The markets are currently pricing in an 8% chance of a +25 basis point FOMC rate hike at the upcoming April policy meeting [8] Geopolitical Developments - Stocks initially fell due to reports of Saudi Arabia and the UAE taking steps toward involvement in the Iran conflict, including granting the US military access to King Fahd Air Base [3] - Renewed tensions in the region have kept oil prices elevated, with Iran launching missile and drone strikes on various targets, including US bases [4] - The International Energy Agency reported that the conflict in Iran is disrupting 7.5% of global oil supply, with potential cuts of 8 million barrels per day this month [7] Company-Specific Movements - Software companies faced declines, with Atlassian down more than -8% and Salesforce down more than -6% following reports of Amazon Web Services developing an AI agent [12] - Cybersecurity stocks also dropped, with Zscaler down more than -7% and CrowdStrike down more than -4% [13] - Energy companies like Marathon Petroleum and Phillips 66 saw increases of more than +4% due to rising crude oil prices [15]