The US stock market fell on Friday as rate hike expectations crossed the 50% threshold for the first time, bond yields hit new highs, and the Iran war showed no signs of de-escalation. The S&P 500 dropped 0.92%, heading for its fifth straight weekly decline.

Three forces drove the selling on Friday, all connected to the same root cause. Oil (Brent Crude) above $100 is feeding into inflation, forcing the Fed’s hand and crushing bonds and equities simultaneously.

The CME FedWatch Tool now shows no expected rate cuts until December 2027 and a 51% probability of a rate hike by March 2027. Surging oil prices are feeding into inflation expectations, forcing the Fed into a corner where easing becomes impossible. Higher rates compress earnings multiples and make risk assets less attractive.

BREAKING: The US Federal Reserve is now no longer expected to cut interest rates until December 2027.

There is now a 51% chance of an interest rate HIKE by March 2027.

Rate HIKES are now more likely than rate CUTS.

How did we end up here? https://t.co/ccQ91LLH3g pic.twitter.com/gefpBO2beI

The 10-year Treasury yield climbed to 4.48%, its highest since the conflict began.

We believe this weekend is a crucial pivot point in the Iran War:

As the bond market continues to get crushed, the 10Y Note Yield just hit a new high of 4.48%. For the first time since the Iran War began, the bond market is nearing or already in "crisis" territory.

US officials…

When yields rise this sharply, it pressures growth stock valuations and competes with equities for capital. The US Dollar Index (DXY) is gaining strength, squeezing multinational earnings as foreign revenue translates into fewer dollars back home.

With over 40% of S&P 500 revenue coming from overseas, the stronger dollar is pressuring the broader index.

Meanwhile, capital has rotated into gold above $4,400 and silver, reflecting a flight into hard stores of value.

Iranian Foreign Minister Abbas Araghchi said exchanges through mediators do not constitute “negotiations with the United States.” Brent crude held above $104, keeping the geopolitical risk premium intact.

Oil above $100 functions as a tax on consumers and businesses, raising input costs and squeezing discretionary spending.

At press time, all three major indexes are in the red.

Market breadth is overwhelmingly negative, with 3,746 stocks declining versus 1,593 advancing.

The S&P 500 continues its decline after breaking down from a bear flag pattern. The breakdown started on March 18 and has already delivered a 3.8% correction. The measured move target sits at 6,347.

If the index fails to reclaim 6,435, the factors above could push it toward 6,347 and even 6,213.

Energy led with a 1.51% gain as Brent stayed above $104. Exxon Mobil (XOM) gained 3.17% at press time, and Chevron (CVX) rose 1.98% as elevated oil prices directly increased producer revenue.

Basic Materials added 1.17% on rotation into commodities. With gold above $4,400 and silver strengthening, mining stocks attracted capital as an inflation and geopolitical hedge.

Utilities gained 1.08% as defensive positioning continued. Risk aversion is overriding the traditional rate sensitivity of the sector, making yield-paying defensives attractive as a parking spot for nervous capital.

Consumer Cyclical led losses at -1.83%. Oil above $100 acts as a direct tax on spending power. Amazon (AMZN) fell 3.38%, and Tesla (TSLA) dropped 1.83%.

Communication Services lost 1.41% as Meta (META) fell 3.65%. Ad-dependent businesses suffer early in slowdowns because advertising budgets are among the first expenses companies cut. Financials declined 1.30 as the speed of the yield surge, combined with recession fears, creates credit risk concerns that outweigh the margin benefit.

Technology lost 1.07% as the Nasdaq entered correction territory and higher bond yields crushed growth stock valuations.

Unity Software sharply higher premarket after raising its Q1 revenue guidance above consensus.
The company sunsetting its ironSource Ads Network. $U 19.42, +2.29, +13.4% pic.twitter.com/sbVLYl9ka3

$CRWD -7%, $PANW -7.2%, $NET -3.75%, $ZS -7.6%, $OKTA -6.7% … [Cybersecurity stocks including CrowdStrike, Palo Alto Networks, Cloudflare, Zscaler, and Okta are falling after Anthropic accidentally leaked details of its new powerful AI model with strong cyber capabilities.]… pic.twitter.com/IZH2vWuL0l

Iran’s counter-proposal to President Trump’s 15-point peace plan is expected today. If the proposal shows willingness to negotiate, oil could retreat and pull equities higher by Monday’s open.

TRUMP AND TOP WHITE HOUSE OFFICIALS HAVE BEEN TOLD THAT IRAN'S COUNTER-PROPOSAL WOULD LIKELY ARRIVE FRIDAY VIA INTERLOCUTORS -SOURCE

If it amounts to another rejection, yields could push above 4.50% next week, and the S&P 500’s 6,347 target comes firmly into play. The weekend could be the most consequential 48 hours for markets since the conflict began.

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