Dow, S&P 500, Nasdaq sink as oil prices surge past $100 a barrel

Software stocks are slipping a bit today after the industry posted its best week since last April’s rebound. But this still looks more like a short-covering bounce than the start of a durable software comeback.

Since bottoming on Feb. 23, the iShares software ETF (IGV) has been positive in eight of the last nine sessions.

The problem for bulls is that the leadership beneath the surface of this market looks more consistent with de-risking than fresh risk appetite.

The sectors that got hit hardest last week in large-caps — Materials (XLB), Consumer Staples (XLP), Health Care (XLV), and Industrials (XLI) — are largely the same group that had held up best since software peaked last September.

In other words, investors appear to be selling their winning longs and buying back one of their biggest shorts, software.

The lone exception is Energy (XLE), which keeps catching a bid as crude oil and energy prices surge.

Software will eventually have its day in the sun, but for now, IGV still looks vulnerable. If it picks up again from here, watch any rebounds with suspicion — especially into key levels like the 50-day moving average near 93 or even the old breakdown area near the November lows of around 101.

The Group of Seven (G7) nations will not yet collectively tap into their strategic petroleum reserves to attempt to put a lid on global oil prices, France said after a meeting of the countries on Monday morning.

“We agreed on following the situation very closely,” France’s finance minister Roland Lescure said after a virtual meeting of G7 finance ministers, according to Bloomberg. “We are ready to take all necessary measures, including using strategic reserves to stabilize the market.”

Futures on Brent crude (BZ=F), the international pricing benchmark, and US benchmark West Texas Intermediate (WTI) crude (CL=F) had both pulled back from $119 per barrel on the news early Monday that the G7 nations would meet to potentially discuss tapping their SPRs.

Oil prices on both Brent and WTI, which had temporarily slipped back below $100, began climbing again after The Wall Street Journal reported that an Iranian military commander said oil would hit $200 per barrel if airstrikes on the country’s infrastructure didn’t stop.

Over the weekend, Tehran was engulfed in black smoke and oil-infused rain following airstrikes on fuel depots outside of Tehran and other cities across the country. Outside of Iran, Bahrain’s Bapco Energies refinery and Qatar’s Ras Laffan LNG complex have declared force majeure, while Saudi Arabia’s Ras Tanura refinery has been taken offline.

Iraq, Kuwait, the UAE, and Saudi Arabia have all announced production cuts as storage has filled up with nowhere to offload oil.

Big banks and regional lenders are getting hit even as the US yield curve steepens, with the 10-year yield (^TNX) up about 8 basis points over the past three days.

The Financial Select Sector SPDR Fund (XLF) is down about 4.5% over this time frame, while the SPDR S&P Regional Banking ETF (KRE) is off roughly 7% — its worst three-day slide since the April 7 washout last year.

That says this is not a simple net interest margin story. A steeper curve would normally help banks, but the market looks more focused on credit risk and a broader growth scare — especially around private credit, where recent stress around Blue Owl and BlackRock withdrawal limits and broader worries about private credit exposure have kept investors on edge.

In other words, the curve is getting friendlier, but the market is still trading financials like a credit-stress proxy. If banks cannot catch a bid on a steeper curve, that is the warning.

The Dow Transports (^DJT) are now on track for a 9% loss over the last three trading days — the biggest three-day slide since the post-“Liberation Day” wipeout last April, when they fell about 13%.

The other Dow index recently failed to clear the 20,000 level after roughly two weeks of trying — carving out a classic pennant chart formation. Now it’s breaking down hard from that wedge, shedding roughly 1,000 points — about 3% — in each of the last three sessions.

The weakness is showing up across this energy-sensitive group, in both consumer-facing and business-to-business names — from United Airlines (UAL), down over 6%, to Uber (UBER), down 3.5%, to freight and logistics name XPO (XPO), also down 3.5%.

This is still one of the clearest canaries in the coal mine. Until the transports can stabilize, it’s hard to make the case that the broader growth scare is really easing.

Futures on international benchmark Brent (BZ=F) and US benchmark West Texas Intermediate (WTI) crude (CL=F) both jumped up to highs of $119 in the minutes after the oil futures market reopened, and spent the evening trading at the same price point.

That the world’s two main pricing benchmarks began trading in parity marked an uncommon market dynamic.

As a general rule, WTI typically trades at a roughly $3 to $7 discount to Brent. The spread reflects differences in logistics and market access.

Brent is priced off oil produced in the North Sea and represents the global seaborne crude market — barrels that can easily be loaded onto tankers and shipped to major refining centers in Europe and Asia. Because it reflects globally traded supply, Brent typically commands a premium.

WTI, by contrast, is priced at storage hubs in Cushing, Okla. While the crude itself is high quality, the pricing point is landlocked and tied more closely to the North American pipeline system. That logistical constraint usually leaves WTI trading slightly cheaper than Brent.

When the two benchmarks trade at the same price, it typically signals that global supply risks are lifting prices across the board and overwhelming the normal logistics premium embedded in Brent. Buyers who would primarily book shipments of Brent are now looking to WTI for backfill while Brent remains unavailable — right now, locked in the Persian Gulf behind the Strait of Hormuz, where shipping has dropped to near-zero as the conflict in Iran continues to burn.

In other words: When WTI trades in parity to Brent, it’s a clear sign the global oil market is under an immense amount of stress.

Overnight, WTI crude (CL=F) and Brent crude (BZ=F) briefly surged to within a hair of $120 a barrel — the highest level for both since mid-2022, in the aftermath of Russia’s invasion of Ukraine. They’ve since pulled back to around $100, but they’re still on pace for huge monthly gains with more than three full trading weeks left in March.

WTI is up more than 50% this month, a move not seen since April 2020, when oil was rebounding from negative prices. That’s also the last time the oil VIX (^OVX), calculated from USO options, traded at a higher level and above 100. Unlike the stocks VIX (^VIX), which typically rises when stocks fall, commodity volatility gauges — gold included — often climb alongside the underlying price.

Brent, meanwhile, is up more than 40% on the month, which would mark its biggest monthly gain in data going back to late 2007.

My first line in the sand was $8, which cracked on Friday. Now the key question is whether crude can hold above $100, which truly changes every playbook around the world.

Shares in Hims & Hers Health (HIMS) soared Monday morning, picking up more than 50% in premarket trading after reports that a longstanding feud with Novo Nordisk (NVO) has ended and that the drugmaker agreed to distribute its products through the Hims platform.

Novo Nordisk shares gained 1%.

Hims and Novo Nordisk could announce a formal partnership as soon as Monday, according to Bloomberg, which broke the news. The reported deal comes after Novo Nordisk sued Hims in February, accusing the platform of distributing copycat versions of its Wegovy weight-loss pill and violating patent protections.

This marks the second time the companies have reportedly entered into a partnership of this kind. Novo Nordisk exited the first deal within two months after accusing Hims of refusing to stop distributing copycats of Novo Nordisk’s drugs.

“The big issue with Hims is that we had an agreement that the mass compounding would stop and unfortunately it didn’t stop,” Ludovic Helfgott, executive vice president of product and portfolio strategy at Novo, said in an interview quoted by Bloomberg. “That’s why we ended the partnership.”

Veteran strategist Chris Rupkey has this solid new hot take on the oil surge below.

I would say his view is still far from the consensus (we go into a recession because of the Iran situation), But we should be on the lookout for commentary like this in the next few days:

Goldman Sachs’ new call on oil already looks outdated, given the outsized move in prices we have seen since last night.