Stocks Drop As Oil Surges, Jobs Shock…And Rising Gas Prices Impact On Your Wallet 3/6/26

0:00At Edward Jones, we believe rich isn't about having life all figured out. It's opening yourself to all the possibilities. That's why your dedicated financial advisor provides long-term planning built around you, meeting you where you are, and helping you get closer to where you want to be. So no matter where you're starting from, you can move forward with confidence. The key to being rich is knowing what counts. Let's find your rich. Edward Jones, member SIPC. Are you as confident as you should be when it comes to growing your business? Is your strategy ready to execute today? If cash flows aren't where they need to be, growth could be at risk, especially in the eyes of your investors, board members, and the business press.

0:44But when your business is operating in top shape, you've earned the right to grow. EY Parthenon can help you reimagine your business and execute a game plan for long-term growth. EY Parthenon. Solutions that work in practice. not just on paper.

1:28disruption in the Strait of Hormuz. Bank stocks get pummeled again today. And we are counting down to Oracle earnings. Will next week's report help the stock climb back to records? We'll debate that. I'm Melissa Lee. Coming to you live from the studio, be at the NASDAQ. On the desk tonight, Tim Seymour, Karen Feinerman, Bono and Eisen, and Steve Grasso. We start off with another red day on Wall Street. Stocks dropping across the board with major indices, all closing at their lowest levels of the year. The Dow falling 453 points, notching its worst week since last April. The S &P and Nasdaq both dropping about one and a half percent.

1:58The conflict in the Middle East spiking oil yet again. WTI breaking above$92 a barrel at one point for the first time since 2023, posting its best week since contracts started trading in 1983. I think it is not 81. Prices surging 36 percent this week and nearly 60 percent since the start of the year. Treasury yields ticking higher early in the day before retreating, the 10-year hitting its highest in nearly a month, breaking above its 50-day moving average. All the equity, oil, and rate swings coming as investors digested the latest jobs data this morning. U.S. payrolls unexpectedly falling by 92 ,000 in February, the third time in five months that the economy has lost jobs, with the unemployment rate rising to 4.4 percent.

2:41What a wild week we've seen, and yet still three and three-quarters percent away from record highs than the S &P, Tim. Interesting. And, you know, that payroll number adds another layer to what was already a concern and, you know, stagflation is coming up now. We can't do this, but it would, it is interesting to think about what would the market have done on a day when you didn't have a payroll number that contracted and you had downward revisions to the three previous months and this concept of higher inflation with a real, you know, at least fear that the job market is weakening quickly. That gets you to a growth scare.

3:15And if you look at some of the allocations in the markets, some of those trades over the pre-Eran days were rotation trades into small caps, equal weighted value. And those are trades that I think made sense given fear around AI and fear around some other parts of the tech world. Now in a growth scare, you don't want to own small caps. Small caps really underperformed today. A lot of the Dow components also and even values. So it's a fascinating day. It's a week where we digested, you know, the first comments are on the week. We were sitting here saying, you know, doesn't feel like the market really cares that much.

3:47And it seems like this is going to be relatively quick. We've seen oil disruption before, but there's no question we're going into a weekend where everyone's now doing their calculus. They're looking at their calendars. We don't know. The uncertainty carries out longer. And that's the old story we say all the time. Uncertainty markets hate it. And I think we have for some time. But then, okay, so growth scare, but then you layer on top of that inflation fear. And all it takes, I mean, Kuwait has already cut back on output. We just need a hit to infrastructure, something that will further disrupt the infrastructure, not just the passage of oil, right, which will take longer to rebuild and longer to come online for that inflation to persist.

4:23Yeah, so, I mean, I agree with Tim, actually, on the rotation back. You know, the VIX at 29 and a half, my guess is we'll see higher than that some point next week. But here's the thing about we haven't seen oil move like this in a really long time. And we definitely haven't seen it yet flow through to the consumer. That will happen. But also thinking about that a little beyond when that happens, even if oil comes all the way back down, there's a stickiness to rising oil prices, right? They don't come all the way back down. So, you know, this has now become a more difficult job for the Fed, where you do have the real threat of inflation, but also evidence that the job market, this is a difficult time for Powell and will be for Warsh.

5:08But, you know, for me, a week like this, I'm always long. It's terrible, but I kind of like what I own. I like to own things that have great balance sheets, good market position. The banks have been horrific, but I still like the space. Yeah, I agree with Tim's take on rotation. You know, we kind of saw, you know, the rotation away from software, AI-related, into more old economy, cyclical heavy names. And I would expect to see that reverse. Along with that reversal, you're starting to see breadth narrow a bit, which I think is a bit concerning, particularly if you're not going to kind of get that broad strength within, you know, mega cap tech, et cetera.

5:47So I think today's job number, as you mentioned, three or five readings showing contraction, I think that is really where the focus is going to be on. And I think that's what leads to the stagflation and the growth stairs. Now, you know me. I'm not really one to panic. Clearly, when I start to see names get dislocated and I start to see 10 and 20 percent type of pullbacks, you're looking for an opportunity to buy. The real question is where. You know, you've seen regionals start to come under pressure. You've seen some of the money center banks even start to come under pressure. I think those are going to be your highest quality names.

6:18I mentioned AXP last week. Now, I do think that some of the spending concerns are real. You probably don't want to be overexposed to retail. You probably don't want to be overexposed to discretionary. Names like Walmart have shown that they've been able to perform within an upmarket. And when you start to see the K-shaped type of dynamics that we've seen between higher and lower income earnings. I think names like your Capital One Financial, you know, you start to question. You just really want to start combing through your balance sheet. But I really do think, to Karen's point as well, sub-30 VIX is not showing you that there's panic.

6:50And I really would caution investors from running for the doors. I'm not saying close your eyes and buy all dips. What I am saying is do not create unsustainable losses in your portfolio by over-churning when everything is red. I mean, but you know the correlation. I'm crossing the hole already. I wish I would have listened to you last week. So what happens if the spike in WTI crude is deflationary? Has anyone thought about that? I'm going to tell you the answer. I'm going to tell you the answer. It's a rhetorical question. Tim knows it by now. I ask, what do you think? But I really don't care.

7:30How does that work? Can you play that out for me? Because I'm not connecting the dots. So the Fed's preferred inflation gauge is the core PCE. Do we believe it's a zero-sum game with dollars? So if you have energy gobbling up more of your wallet, you have less money to spend on retail, restaurants, travel. Sure. Correct? So if the Fed's core PCE doesn't include energy, that's where all the inflation is coming from. And if you're spending less on the things that it does include, inflation actually goes down in their mind. Wow. Wait a minute. Can I? Okay. So let me ask you. You go first, Karen. I'm right in behind you.

8:14So by that logic, then, if oil were to plummet, that's highly inflationary. So if oil were to plummet, it is it is inflationary to a certain degree. But this is the scenario that we're in now. It's a supply shock. Right. So supply shocks aren't in their nature inflationary because booms are inflationary. Too many dollars chasing the same thing. Right. Too many dollars. That's what inflation is. Too many dollars chasing the same basket of goods. But if we only have one basket that the dollars are chasing, all the other ones, by effect, are deflationary. What we've seen every time we've had a spike in oil is that oil feeds into the entire basket.

8:54And I hear where you're doing. You're doing your math on Fed computations and whatnot. But there's no question what we've already seen in the price of steel, aluminum, fertilizers. And we're and we haven't even gotten into the food shortage story and what's going on with 30 percent of the world's nitrogen and whatnot coming from the Middle East. So, I mean, I think the the the greatest fear that I have as a market participant is not inflation, is not stagflation, is not it's it's that the market is not priced for a recession. OK, so the growth slowdown to me, the things that we're talking about, whether they're inflationary or not, you can get on either side of this.

9:31To me, the biggest issue is that a slowdown, and we started to see that in certain parts of the market. The banks weren't down today on private credit. They were down today on a slowdown, on the slowdown in the consumer from a jobs perspective, from the economic perspective. And to me, this is a market at 22 times. All the other times we've had spikes in oil, and it goes back to 1980, you've had the S &P at 14 to 16 times forward. We're at 22 times forward, and that's a very different scenario. So by that logic, I mean, if we are if you're worried about the growth scare and you layer on the inflation scare, what does that pricing in the market look like?

10:10Well, first of all, we heard from Feds Waller today that they're not that worried about inflation right now. And maybe as Steve's saying, it's a supply shock. They don't think it's that big a deal. I get that. I think, though, what we are really seeing is that we had ISM and manufacturing numbers. We're seeing this prices and this input component of it. I think prices are going higher. I do think also there'll be tons of service, or I would say they kind of add-ons to different types of utility bills you're going to be seeing from this. It really gets back to, though, I think the market just doesn't have any certainty on two or three very important levels.

10:47By the way, you know, this is a day when we digested BlackRock actually gating one of their funds. We've been talking about private credit for a long time, but this is really you finally got some of this news bubbling through to the surface. We have Oracle and OpenAI saying they're going to pull back on a data center that hit the chip stocks. So there's different pieces of what was the mosaic coming into Iran that today didn't play out so well on top of a weaker labor market. Yet the indices are only down two percent. That's that's all everybody's talking about. What does that do if you're afraid of growth and you have the inflation spike on just energy?

11:21I think there's a deflation spike. No, I think there's—I think what you're going to see is high prices are the cure for high prices. So I think what you're going to see is the Fed is going to get pulled back into this, where everyone thinks they're pushing off the cuts. I think you're going to see cuts. And even if you don't see them now, you're going to see them in May, right? So that's what we have to prepare for in the markets, which means higher equity prices. All right. We have a news alert that we want to get to on some changes at the FDA. Our Angelica Peebles has the details on this. Angelica.

11:51Hey, Melissa. Well, the FDA's top vaccines and biologic drugs director, Vinay Prasad, is leaving the agency at the end of April. That's according to an FDA spokesperson. Now, the Wall Street Journal is quoting FDA Commissioner Marty McCary, saying that Prasad wanted to help implement a series of new policies that have all been announced and that, quote, he's been really successful and gotten a lot done in a year. Now, Melissa, you know that this has been a very controversial director. Prasad has been at the center of a number of recent rejections, at least eight reversals in the past year or so.

12:25And so this has all come to a head in the past week with Unicure's gene therapy for Huntington's disease. And there's been this noise, this back and forth all week between the company and the agency. And now it seems like you're seeing that come to a head with his departure at the end of next month. Mel? So this is actually his second departure, correct, Angelica? Yes, this is his second departure. I don't know if this will be the final, but you would have to assume that this is probably the last for him. Yeah. Okay. I thought the last was the last. Angelica, thank you. Angelica Peebles. All right.

12:57For more on just how much of the consumer spending is being eaten up by rising oil prices, Moody's Analytics Chief Economist Mark Zandi joins us now. Mark, great to have you with us. Everybody says, oh, you know, gas prices and energy, it's only 1.8 percent of consumer spending, but as a percent of non-housing spend, it's actually much greater. And we haven't seen that. That's just the straight math on the impact of gas prices and energy prices. It's not the flow through. So how do you think about this in total? I think it's a big deal. I mean, if it's sustained, if the higher prices are sustained, I mean, every$10 a barrel increase in the price will raise the cost of a gallon of gasoline by 25 cents, and that costs the American household,$250 a year.

13:44And then that's just the gasoline. Obviously, this affects diesel, which goes into the price of everything, anything that's put on a truck, groceries, anything that you can deliver to your door. So you add that all in, it's about$450 per household over a period of a year. Now, for many high-income, high-net-worth households, that's no big deal. It's not going to make a dent in what they do. But for many lower and middle-income Americans, that's a big deal. I mean, they've got to make some hard choices. They're living paycheck to paycheck. So if they're putting more of their dollars in their gasoline tank, that means they've got to make decisions about cutting back somewhere else or not paying on their credit card bill or make a typical choice.

14:26So I think it's a really big deal. And the other thing, as you were alluding to, it's not just about the dollars and cents. There's no price that is more central to the way Americans think about the cost of living. And obviously, that's top of mind here at this current time. than the cost of a gallon of regular unleaded. They see that price every day when they're going to work. They have to fill their gas tank twice a week. They know that price. And so when that goes up, that undermines sentiment and confidence, and the mood of the American people is already pretty bleak. And we're just talking a$10 barrel increase.

14:59Right now, if we stay where we are for any length of time, that's a$30 barrel increase. So I don't know. I wouldn't dismiss this. I think this is a deal. Obviously, it depends on how long it lasts and what the president does in response, and I'm sure he is going to respond. But nonetheless, I pay close attention. How long is a lengthy amount of time for it to be a concern for you, a longer-lasting concern, where we start seeing the numbers? Yeah, a week or two, I think we digest it and we move on. If it's a month or two, that's a deal. It's a big deal. And then think about it in the context of no job creation.

15:33I mean, we are literally creating no jobs. We haven't created any jobs since Liberation Day back last April. Unemployment is low, but it is definitely moving steadily higher. We're up a percentage point from where we were three years ago, and it's moving steadily higher here. So in that context, with that backdrop, you know, these kind of numbers, you know, I think really hurt. So not a week or two, month or two. Yeah, that could be a real problem, particularly if we stick around$90 a barrel. Hey, Mark, thanks for joining us. I want to dive into what you just talked about, the sensitivity on gas prices to the household spend.

16:06And WTI back in late last year was at a five handle, had a, you know, fifty six, fifty seven dollars. And I'm just wondering, as we look back at some of the consumption trends, let's face it, we went into twenty six with a stronger economy than we had expected. We went into twenty six with on our side of the desk. You know, EPS trends are a whole lot better. Are we as good as we're going to have it for a long time? And I think this feeds into the Walmart move. I'm not asking you to opine on Walmart's valuation. But but in hindsight, taking the other side of what you just talked about, were we in it in almost a Goldilocks scenario right now back then?

16:43Excuse me, in terms of commodities and what that meant for the economy. And we might not see that for a long time, independent of the war. Yeah, Tim, that feels right. I mean, you know, we're not going back to fifty six, sixty dollars a barrel, at least not any time in the year unless we go into recession. I mean, I just don't see that occurring. And, you know, the one thing, though, the one thing that might save the day here, at least temporarily, is all this fiscal stimulus, right? It's deficit finance tax cuts for businesses, but also for individuals. I mean, refund checks are coming in at quite large or$300,$350 more than last year.

17:17And so that really helps out those folks that are getting those refund checks. So that could save the day. It's temporary. You know, it'll help for a month, two or three. But that might save the day if oil prices come back in. By the way, I was listening to your conversation before I came on, this whole thing about oil prices not being inflationary. It's inflationary. And the other thing to consider is that the Fed doesn't target the core PCE deflator. It targets the PCE deflator. If you look in their framework, that's what they focus on in terms of their 2 % target. So I don't think I'd make this argument that higher oil prices leads to less inflation.

17:54It's going to lead to more inflation. And the American people are going to be telling us that pretty soon. All right. Thanks for straightening that up, Mark. Appreciate it. Great to see you. Have a good weekend. Mark Zandi of Moody's. Yeah. So it's just inflationary, Steve. So it's OK. But what I would like to address, though, is the WTI Brent spread. Right. So that's normally a normal normal life. It's six percent Brent over WTI. It's two percent now. So and the reason for that is one's landlocked, right, Cushing, and the other one is Seaborn. And now we're collapsing on each other. There's no reason for WTI to be up this much.

18:35It's sheer panic. So the point is, is that one of these is wrong. And we know Brent's right, right? Because Brent is Seaborn global and it's a thicker, it's a heavier. So WTI should be, in theory, if it's historically tracked the way it's tracked, it should be trading around$70,$75. So when Tim talks about where we were in the 50s, why were we in the 50s? Because we're in a glut. We're in an oversupply. U.S., Guyana, Brazil, non-OPEC, pumping, OPEC, oversupplied. So I get it, the infrastructure problem, but that's a Brent problem. That's not WTI. So be careful if you're looking at WTI, because the bottom can fall out of WTI a lot quicker than it can fall out of Brent.

19:23All right. Meantime, chemical stocks seeming to benefit from the disruptions in the Strait of Hormuz. CF Industries and Leandell Basel, among the names moving higher, the stocks have seen as alternatives as traders grapple with tight oil supplies and higher prices due to the conflict. Urea, which is a key component for fertilizer, that is impacted by the Strait of Hormuz. ethylene and polyethylene for Lionel Basel, as well as Dow, which got a number of upgrades this week on the back of the capacity being sort of cut off or limited. But this goes back to our conversation of how all of this filters into the broader economy, because obviously they make inputs to make other things.

20:04Right. And so if you're saying, OK, Dow and Lionel Basel, your earnings are going to look great because of this. Somebody is paying the price. Right, right. Definitely someone's paying the price, though. Similarly to the way some other things have spiked, I wouldn't be chasing this either as quickly as it happened. If there is a quicker resolution, I'll turn around and go right down. But it's fascinating to see this situation work its way through the entire economy pretty quickly. Yeah, I mean, listen, the bull case for these chemical companies is inflationary. I am very receptive to all points of view, particularly when there's a disruption.

20:42So, like, I acknowledge Steve's point. This in particular, like CF, Lyondale, Dow, I think this is speaking to inflation. And I think if you're looking for a short-term hedge or somewhere to hide, that's probably a short-term trading position that, like, you may want to take in. You're probably underweight chemicals or industrials anyway. But again, to Steve's point about the bottom dropping out, if margins start to compress again, then you're going to want to be out of this trade pretty quickly. Or if there is a growth scare and growth is a problem, you don't want to be in the sector. No, you don't want to be in the sector.

21:15I think we're all saying something similar. This is this is this doesn't read well. And also the geopolitics of food shortages that come from lack of access to fertilizers is going to get ugly in a hurry. And, again, I think there's a lot more in terms of the dominoes that are falling here that will play out next week. Coming up, banks in the tank. Financials down again today as private credit fears just won't go away. Just how shaky is a space next. Plus, a good prognosis for big pharma. One Wall Street firm sees tailwinds for the group where the upside could come from right after this. Do not go anywhere.

21:48Fast Money is back in two. Adventure Global. We think about what can be done, not what's usually done. Through innovation, Venture Global is not only building some of the largest energy facilities in the world right here in the United States, but delivering American energy at a fraction of the cost and a fraction of the time. So while others are busy talking, we're busy building. That's Venture Global. That's unstoppable energy. It's smart to always have a few financial goals. And a really smart one you can set? earning cash back on what you buy every day. And with Discover, you can. Get this.

22:32Discover automatically matches all the cash back you've earned at the end of your first year. Seriously, all of it. And we trust you to make smart decisions. After all, you listen to this show. See terms at discover.com slash credit card. Ever notice how life's best stories don't happen in your living room? They happen on the open road, out on the water, or parked under the stars. At Progressive, they get that you want to focus on the experience, not worry about the what-ifs. That's why they offer quality insurance designed for your ride, whether that's a boat, RV, or motorcycle. Adventure with confidence.

23:06Visit Progressive.com and see how easy it is to protect your favorite way to get away. Progressive Casualty Insurance Company and Affiliates. Not available in D.C. Prices vary based on how you buy. We've got a news alert on some new additions to the S &P 500. Vertiv, Lumentum, Coherent and EchoStar will join the large cap S &P 500. Being deleted, Match Group, Molina Health, Lamb Weston and Paycom. The changes will take effect on March 23rd. Well, banks under continued pressure today with all but one of the 101 stocks in the KBE banking ETF closing in negative territory. Citi, Wells Fargo and Bank of America seen the steepest declines among the money centers, each down roughly 2 percent.

23:47Asset managers also taking a hit after BlackRock said it would limit withdrawals from one of its debt funds. That stock down 7 percent. Aries, KKR and Invesco also sharply lower. What do you make of the move lower here? So we've been following the Blue Owl situation as it sort of unfolded in slow motion for a while. And that's sort of put a spotlight on the whole space. And then we do know that the big money center banks lend to private credit. So there's some sort of add on fear there. I think there's sort of been a big mismatch between the idea of private credit and it's a semi liquid thing.

24:23And if you have an idiosyncratic need for your money, you could probably get it back. But if everyone wants to get their money at the same time, the underlying assets aren't that liquid. So, you know, I think we'll continue to see some pain for a while, but I don't think they're all the same. But, you know, in full disclosure, I'm married to a private credit guy. So, yes. So that makes me sort of long the space. Right. To believe that there's not a problem. Figuratively. Yeah, yeah. No, that is fair. As you had mentioned, I mean, private credit in recent years have opened their doors to retail investors.