78.3
That is where the ISM Prices Index landed yesterday, its highest reading since June 2022. It climbed 7.8 points in a single month and 19.3 points over the last two. Manufacturing is still expanding at 52.7, the third straight month above 50. But the cost of keeping it expanding just became the story.
What matters:
The S&P 500 surged 0.72% Wednesday to close at 6,575.32. The Dow gained 224 points to 46,565.74. The Nasdaq jumped 1.16% to 21,840.95. Futures this morning are pointing sharply lower.
Brent crude is trading above $105 per barrel after spiking on Trump's primetime address. WTI is above $103.
The 10-year Treasury yield is around 4.38%. Gold fell more than 2% overnight. Bitcoin is around $66,000.
The rally lasted one session. Markets spent Wednesday afternoon pricing in the headline that the war is "nearing completion." Then came the details: two to three more weeks of strikes Trump described as "extremely hard," a threat to destroy every electric generating plant in Iran if no deal materializes, and no confirmed ceasefire framework. Oil surged roughly 4% on the speech. Futures reversed overnight.
The ISM data adds a second layer. The headline expansion number is healthy. But the Prices subindex at 78.3 tells you the oil shock is already flowing through to manufacturing input costs at a pace the market has not absorbed. New orders dipped to 53.5 from 55.8 in February, still expansionary but decelerating. Employment stayed below 50 at 48.7. Manufacturers are paying sharply more for inputs while hiring less and seeing fewer new orders. That does not support Q2 earnings estimates built on moderate cost assumptions, and the repricing of those estimates has barely started.
Energy remains the clearest sector trade. XLE has been the only major sector ETF in the green through this entire conflict. With Brent above $105 and weeks more of strikes ahead, the thesis has not changed. Refiners with no Middle East exposure, Valero (VLO) and Marathon Petroleum (MPC), continue to benefit from the widening spread between WTI and the physical premiums Asian importers are paying. Defense names RTX, Lockheed Martin (LMT), and Northrop Grumman (NOC) held through yesterday's peace-hope rally, which tells you the sector is not repricing the conflict as ending.
The UK is hosting a 35-country virtual summit today on reopening the Strait of Hormuz. If anything concrete emerges, a naval escort framework, a safe-passage timeline, even a preliminary agreement, energy reprices hard to the downside. If it produces nothing actionable, the physical oil market stays tight and every day of disruption adds to the insurance and logistics costs that take months to unwind even after the shooting stops.
One story unrelated to oil: SpaceX filed confidentially for an IPO that could target a valuation above $1.75 trillion, which would make it the largest public offering in history. The filing follows the xAI merger that created a combined space-and-AI entity. Space-adjacent names moved on the headline yesterday, and the ripple effects into venture pricing, AI valuations, and defense contracting will play out over the coming months.
Worth bookmarking: The FRED 10-year Treasury tracker for the yield repricing everything from mortgage rates to equity multiples. And ISM's March manufacturing report for the full breakdown on why 78.3 matters more than the headline PMI.
