The hang-up is the lack of back up

Briefing.com Summary:

*Oil prices are moving higher again, as hostilities in the Middle East continue.

*Concerns about the private credit market continue to fester.

*Q4 productivity was revised down, while unit labor costs were revised up.

Watching yesterday’s market action reminded us of days when there would be praise for the market’s resilience in the face of bad news. You might hear something like, “The S&P 500 impressed by finishing 1.0% higher even though it was dealing with X, Y, and Z negative factors.” Yesterday, though, had a different feel to it, a less impressive one, all things considered.

To wit: oil prices and Treasury yields both dropped after the president said there were productive conversations with Iran and that, because of that, he had ordered the Department of War to hold off bombing Iran’s power plants and energy infrastructure for a five-day period, subject to the success of ongoing meetings.

Ostensibly, this was all very good news on the surface, yet the S&P 500 was up “only” 1.1%. From our vantage point, that was an underwhelming return given that (a) the president seemed to signal for a lane change to get to the off-ramp (b) the S&P 500 closed near its lows for the session and (c) the S&P 500 failed to close above its 200-day moving average.

There was reason to expect more out of the stock market when the president first made his announcement. The hang-up is that Iran didn’t back up the president’s statement. Instead, it denied that any conversations had taken place, leaving market participants in purgatory, looking up at the hope of an end to the war and staring down at the hell of a prolonged conflict.

Purgatory is where it remains today. WTI crude futures are up 4.2% to $91.81/bbl, with Chevron’s (CVX) CEO saying the oil market hasn’t fully priced in the supply disruption; the 10-yr note yield is up six basis points to 4.39%; and the equity futures are lower.

Currently, the S&P 500 futures are down 36 points and are trading 0.4% below fair value, the Nasdaq 100 futures are down 131 points and are trading 0.5% below fair value, and the Dow Jones Industrial Average futures are down 278 points and are trading 0.5% below fair value.

The lack of follow-through buying interest in the stock market has been stymied by reports of Israel and Iran still firing missiles, suggestions that Saudi Arabia and the UAE are potentially moving closer to a military response of their own against Iran, and ongoing concerns about the private credit market after Moody’s cut FS KKR (FSK) to junk and Apollo (APO) said it is sticking by a 5% quarterly cap on redemption requests even though it received requests equal to 11.2% of shares outstanding for its $15 billion Apollo Debt Solutions BDC.

Another limiting factor has been the revised Q4 productivity report, which did not move in a favored direction.

Q4 productivity was revised down to 1.8% (Briefing.com consensus: 2.5%) from the preliminary estimate of 2.8%, while unit labor costs were revised up to 4.4% (Briefing.com consensus: 3.1%) from the preliminary estimate of 2.8%.

The key takeaway from the report is the dichotomy of lower productivity and higher unit labor costs, the latter of which will contribute to the Fed’s reticence to cut rates soon (even though this is a dated report).

The preliminary March S&P Global U.S. Manufacturing (prior 50.2) and Services (prior 50.4) PMI reports will be released at 9:45 a.m. ET. The wait is on, then, for those reports, just as the wait is on to see how the stock market responds today following yesterday’s not-so-hot response. Once again, watch for oil prices and interest rates to be the guide.

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Originally Posted March 24, 2026 – The hang-up is the lack of back up