🐺 The Dow Just Entered Correction Territory

Happy Friday. The Dow just joined the correction club, the Nasdaq renewed its membership, and the S&P 500 is the last major index still hanging on by a thread. Not exactly the start to spring anyone had in mind.

S&P 500: 6,368.85 (-1.67%). Dow: 45,166.64 (-793 pts). Nasdaq: 20,948.36 (-2.15%). Brent crude: $112. 10Y yield: 4.42%. VIX: 27. Gold: $5,061. Bitcoin: $66,497.

WAR › The Dow fell 793 points on Friday and entered correction territory for the first time since early 2023, joining the Nasdaq, which is now down 10.9% from its October high. Brent crude topped $112 after Iran turned back two China-owned container vessels from the Strait of Hormuz, per the WSJ. President Trump extended his deadline for Iran to reopen the strait by 10 days to April 6, calling talks "very well" while Iran denied any direct negotiations. Meanwhile, the Pentagon is weighing 10,000 additional ground troops to give Trump more military options.

MARKETS › The S&P 500 posted its fifth straight weekly decline, falling 2.1% for the week and 6.8% for the month. If that holds, it's the worst March since December 2022. Every single Magnificent 7 name is now down more than 10% from its highs. Citi cut its equity allocation to neutral, citing "most of our negative equity macro risk signals triggering." Nineteen S&P 500 stocks hit new 52-week highs on Friday. The number hitting new lows was much longer.

WARNING › For the first time since 2023, futures markets are now pricing in a rate hike. The probability of the Fed raising rates by year-end crossed 50% on Friday morning. The OECD raised its G20 inflation forecast to 4% from 2.8%, entirely because of the war. Philly Fed President Paulson said inflation running above 2% is making her "more apprehensive" about policy. Mortgage rates have already climbed from around 6% to above 6.5% since the war started. The 20-year Treasury yield hit 4.97%.

DEALS › Vanguard announced stock splits across nine of its largest ETFs, including a 6:1 split for VUG, a 10:1 for MGK, and splits for VTV, VIG, VO, VB, VXUS, VEA, and VWO. This doesn't change anything about the funds themselves, but it does lower share prices for investors who prefer buying whole shares or using these in smaller accounts.

TECH › Microsoft told managers at Azure cloud and North American sales divisions to suspend new hiring, per The Information. That's notable because Azure is supposed to be the growth engine. When companies freeze hiring in their fastest-growing units, it usually means the macro is making everyone cautious, not just the laggards.

Rate hike odds crossed 50%.

On Friday morning, futures traders pushed the probability of the Fed raising rates by year-end above the 50% threshold. That's a sentence that would have been unthinkable six months ago, when the debate was about how many cuts we'd get.

The math isn't complicated. WTI is up more than 60% since January. Brent topped $112 on Friday. The OECD just raised its G20 inflation forecast to 4%, up from 2.8% in December, and cited the Iran war as the entire reason. Gas is at $3.98 a gallon. Heating oil spiked 8% on Thursday alone.

The Fed is stuck.

The economy is slowing (GDP already missed at 1.4% last quarter), but inflation is reaccelerating through the energy channel. That's the stagflation bind. Cut rates and you risk pouring fuel on inflation that's already running hot. Hike rates and you tip a weakening economy into something worse. The Fed held steady at its March meeting and still officially expects one cut this year. But the bond market is telling a different story. The 10-year yield hit 4.42%, the 20-year touched 4.97%, and mortgage rates have jumped from 6% to above 6.5% in less than a month.

What this means for positioning.

When rate hike odds are rising, long-duration assets get hit hardest. That's growth stocks, long-dated bonds, and anything priced on future earnings. What works: shorter-duration fixed income, energy exposure, companies with pricing power and current cash flow. The market is repricing in real time, and it's not done yet.

Watch the April 6 Iran deadline. If talks fail and Hormuz stays disrupted, the next stop for oil is $120+, and the rate hike conversation moves from "possible" to "probable."

Rallies flagged over $40 million in index put flow into Thursday's close, including roughly $21 million in SPY December 2026 740 puts and $19.6 million in QQQ April 605 puts. That's not hedging. That's institutions paying a premium for protection they think they'll need. The full options breakdown and community positioning data is on the platform.

See the full breakdown on Rallies →

Thanks for reading! Catch you in the next one!

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