This week: the oil shock premium, the AI capex tape, and credit as the speed limit
(Desk notes using Sam Cutler’s lens — ex-ARB prop; now PM at 333 Capital with an ARB Multi-Strat allocation.)
The market handed us a clean sequence: energy shock → inflation fear → curve repricing → equity dispersion.
Monday’s shock did not become a disorderly unwind: U.S. equities clawed back hard enough for the S&P to finish basically flat and the Nasdaq higher even as crude surged after the strikes on Iran. Tuesday was the real de-risk day as inflation fears hit broad equities.
Wednesday repaired part of that damage on stronger services data and Broadcom’s AI-linked outlook. Thursday, then re-imposed discipline: oil jumped again, yields rose, and the Dow took the heavier hit, even with Broadcom up 4.8%.
That matters because this still does not read like classic risk-off. It reads like an inflation shock being routed through energy, then discounted through the curve. The market is not yet charging broadly for balance-sheet stress; it is charging more aggressively for duration, crowded growth exposure, and anything that needs lower yields to justify rich multiples.
Credit helps make that distinction: high-yield OAS widened to 3.08% on Tuesday, then eased back to 2.97% by Wednesday on the latest available print.
Sam’s lens — the two-engine economy, with a new constraint
Sam’s two-engine framework still fits because the split is intact: the production/investment side is holding up, while labor is stable but not powerful enough to absorb every new inflation impulse.
Engine 1: production/investment is still alive, but cost pressure is back
ISM Manufacturing held at 52.4, with Prices at 70.5 and Backlog at 56.6 — a clean signal that activity is improving, but not in a disinflationary way. ISM Services was even stronger at 56.1, with Business Activity at 59.9 and New Orders at 58.6. Add in January import prices rising 0.2%, and the message is straightforward: demand is still there, but the cost side is no longer cooperative.
Engine 2: labor is steady, but not tight enough to dominate the macro tape
ADP showed +63,000 private payrolls in February, with job-stayer pay still up 4.5% YoY. Weekly initial claims held at 213,000, which tells you layoffs are not breaking higher. Productivity stayed respectable at 2.8% annualized in Q4, though unit labor costs also rebounded. That is not recession data. It is stable enough labor sitting underneath a market that is more concerned with energy and prices than with an immediate growth rollover.
The Beige Book fits that same picture: overall activity grew at a slight-to-moderate pace, employment was broadly stable, and prices rose moderately, with energy, metals, utilities, and tariffs all showing up as cost pressures. That is a “hold longer” backdrop far more than a “cuts are imminent” backdrop.
The new constraint is energy
This is the real update versus yesterday’s version: the oil move did not fade. On Monday, WTI settled at $71.23 and Brent at $77.74. By Thursday, WTI had settled at $81.01 and Brent at $85.41, with the Strait of Hormuz still functioning as the market’s live supply-risk variable.
Once that happens, strong PMIs stop being automatically bullish for long-duration equities, because the same growth resilience also gives the Fed less room to ignore higher energy and input costs.
What changed vs last week:
Last week, the framing was simple: credit was the speed limit. That is still true, but this week added a nuance. Credit did not break, yet it also did not give the market a free pass. The tape could absorb a geopolitical shock without turning into a funding scare — but it still punished the wrong exposures.
Equities: hold → flush → repair → tax the bounce
- Mon (Mar 2): Dow -0.15%, S&P +0.04%, Nasdaq +0.36%.
- Tue (Mar 3): broad selloff; Dow -0.83%, S&P -0.94%, Nasdaq -1.02%.
- Wed (Mar 4): rebound; Dow +0.49%, S&P +0.78%, Nasdaq +1.29%.
- Thu (Mar 5): oil and yields retook control; Dow -1.61%, S&P -0.56%, Nasdaq -0.26%.
Levels (Thu Feb 26 → Thu Mar 5):
- S&P 500: 6,908.86 → 6,830.71 (-78.15)
- Nasdaq Composite: 22,878.38 → 22,748.99 (-129.39)
- Dow: 49,499.20 → 47,954.74 (-1,544.46)
The more useful read than the index changes: this was a bad week for lazy index thinking. Energy and defense cushioned the tape, AI infrastructure held up better than many expected, and the penalty landed harder on rate-sensitive and travel-linked exposures. Thursday made that especially obvious.
Volatility: the fear bid was real, but not disorderly
- VIX closes show the reprice happened fast: 18.63 last Thursday, 21.44 Monday, 23.57 Tuesday, then back to 21.15 Wednesday. That is a meaningful premium reset, but not the kind of vol regime that usually accompanies a genuine credit event.
Rates / curve: the front end still matters most
- The 10Y moved from roughly 4.02% late last week to about 4.13% by Thursday, while the 2Y moved from 3.42% to around 3.58%. That is consistent with a market pricing less near-term easing as energy risk lifts inflation pressure. It is not the signature of a pure growth scare.
Credit: wider at the wobble, calmer on the rebound
- High-yield OAS moved from 2.98% on Feb. 26 to 3.08% on Mar. 3, then eased to 2.97% on Mar. 4 on the latest posted reading. That is the important correction to yesterday’s draft: credit did wobble, but it did not keep worsening into the back half of the week. That keeps this in the “selection and repricing” bucket rather than the “deleveraging spiral” bucket.
AI capex: Broadcom improved the tape, but it didn’t change the macro hierarchy
- Broadcom’s forecast that AI chip sales could exceed $100 billion next year was another clear signal that infrastructure demand remains live. Its stock rose 4.8% Thursday and helped limit Nasdaq damage. But that is exactly the point: a strong AI-capex signal could cushion the index, not fully reverse the oil/yield shock. AI is still getting funded; it is just being priced inside a harsher macro backdrop.
Macro & risk tone — the rule we’re trading
Credit is the speed limit. Energy is the trigger.
If oil stays elevated and payrolls print firm enough to keep front-end yields heavy, the market is unlikely to hand out clean, index-wide risk-on conditions. You are more likely to get continued dispersion: better sponsorship for energy, defense, and selected AI infrastructure; more punishment for anything that relies on falling rates or cheap input assumptions.
If payrolls softens just enough to cool front-end pressure without making growth look fragile, that is the cleaner relief path into CPI week.
What we’re watching next
At the time of writing, Friday payrolls are still ahead, so I have left it forward-looking rather than risk jamming in an unverified print. That remains the week’s final arbiter. A hot-enough labor print alongside elevated oil keeps the curve heavy and makes next week’s CPI even more sensitive.
A softer print that stays short of “growth scare” territory gives equities a better chance to stabilize — but only if credit stays calm. CPI is still the bigger macro handoff waiting on deck.
Hear the full conversation with Sam and Mike on LiveSquawk.