Financial Markets                      03/13 15:39

   

   Wall Street's losses deepened Friday as the ongoing fallout from the war in 
Iran keeps pushing oil prices higher, ratcheting up inflationary pressure on 
the global economy.

   The S&P 500 fell 0.6% after having been up as much as 0.9% in the early 
going. The benchmark index is now down 3.1% so far this year.

   The Dow Jones Industrial Average lost 0.3%, and the Nasdaq composite 
finished 0.9% lower. The indexes also ended the week with their third straight 
weekly loss.

   After briefly easing early Friday, crude oil prices rose again, bringing the 
benchmark oil price back above $100 a barrel. Brent crude, the international 
standard, closed 2.7% higher at $103.14 per barrel. It's up about 40% for the 
month.

   A barrel of U.S. crude oil rose 3.1% to settle at $98.71. It's risen around 
46% this month.

   "Everything's just trading with crude oil at this point," said Michael 
Antonelli, market strategist at Baird. "We're basically in a holding pattern 
until we get kind of the hour-by-hour, day-by-day news about the conflict in 
the Middle East."

   Oil prices have been volatile since the start of the war. Iran's actions 
have effectively stopped cargo traffic through the narrow Strait of Hormuz, 
where a fifth of the world's oil typically sails. That has oil producers 
cutting production because their crude has nowhere to go.

   In just over a week since the closure of the Strait of Hormuz, more than 12 
million barrels of oil equivalent per day have been taken offline, according to 
independent research firm Rystad Energy.

   If the war continues to hamper the production and transportation of oil from 
the Persian Gulf, it could cause a surge in inflation that could hurt the 
global economy.

   President Donald Trump signaled earlier this week that he would take more 
action to address the squeeze on oil flows. The move follows the 
administration's decision to grant temporary permission for India to buy 
Russian oil.

   While the International Energy Agency said Wednesday its members would make 
a record 400 million barrels of oil available from their emergency reserves, 
some economists believe that would do little to reassure markets.

   Long-term bond yields continued to rise Friday as bond market traders 
reacted to the latest rise in oil prices, a key driver of inflation.

   The yield on the 10-year Treasury rose to 4.28% from 4.26% late Thursday. It 
was just 3.97% before the war started.

   When bond yields rise they can push up interest rates on consumer loans, 
such as mortgages for prospective U.S. homebuyers and bond offerings for 
companies looking to expand. They also push down on prices for all kinds of 
investments, from stocks to crypto.

   "Higher inflation expectations means higher yields, and then as the higher 
inflation expectations go, rate cuts start to be priced out," Antonelli said. 
"And that's the whammy that we're seeing right now."

   A Fed rate cut could give the economy and job market a boost, but also 
potentially worsen inflation. The Federal Reserve is scheduled to hold its next 
interest rate policy meetings next week. However, Wall Street traders put the 
odds of a rate cut at less than 1%, according to CME Group.

   A new snapshot of consumer spending Friday shows inflation crept higher in 
January, even before the Iran war caused oil and gas prices to spike.

   The Commerce Department said prices rose 2.8% in January compared with a 
year earlier. But excluding the volatile food and energy categories -- which 
the Federal Reserve pays closer attention to -- core prices rose 3.1%, up from 
3% in the prior month and the highest in nearly two years.

   Even so, consumers still lifted their spending at a solid 0.4% pace in 
January, with their incomes rising at the same pace, according to the report.

   The University of Michigan's latest gauge of consumer sentiment on Friday 
showed consumer sentiment declined slightly to its lowest reading of the year 
as gasoline price hikes since the start of the war in Iran.

   Wall Street also got an update on how U.S. economic growth fared in the 
October-December quarter. The economy, hobbled by last fall's 43-day government 
shutdown, grew at a sluggish 0.7% annual rate, a downgrade from its initial 
estimate last month.

   Ulta Beauty slid 14.2% for the biggest decline among S&P 500 stocks after 
the beauty and makeup retailer's latest quarterly results fell short of 
analysts' profit targets. Ulta's profit was dinged by a 23% increase in 
selling, general and administrative expenses, which jumped to $1 billion in the 
period.

   All told, the S&P 500 fell 40.43 points to 6,632.19. The Dow lost 119.38 
points to finish at 46,558.47, and the Nasdaq dropped 206.62 points to 
22,105.36.

   In stock markets abroad, indexes in Europe closed mostly lower after falling 
in Asia.

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