Jobs Alert. Stock markets this week largely made peace with war in the Middle East. Economic problems on the home front may be a different story.

Major indexes fell sharply on Friday after the February payrolls report from the U.S. Bureau of Labor Statistics showed a surprise loss of 92,000 jobs during the month. Economists had expected a gain of 60,000 jobs. The unemployment rate ticked up to 4.4%, from 4.3%.

The Dow Jones Industrial Average fell 404 points, or 0.8%, while the S&P 500 was off 0.9%. The Nasdaq Composite ended the day down 1%.

A recessionary vibe filled Wall Street, with the defensive consumer staples sector leading the way, up 0.3%. More economically sensitive sectors underperformed, capped by a 2% drop in consumer discretionary stocks.

News of a potentially weakening economy along with the inflationary threat of rising energy prices had investors on alert for stagflation, the dreaded pairing of slow growth and rising prices.

The dynamic could handicap the Federal Reserve. Stimulative rate cuts are harder to justify if inflation is simultaneously heating up.

“The rise in the unemployment rate to 4.4% suggests to us that the Fed will retain an easing bias in its communications at the March meeting,” Andrew Husby, senior U.S. economist at BNP Paribas wrote Friday. “However, we doubt that the print will add urgency for a near-term cut given inflationary risks around the U.S.-Iran conflict.”

Energy is at the core of the pricing worries. Crude oil soared 12.2% on Friday, to $90.90 a barrel, its largest one-day gain since May 2020. Crude ended the week up 36%.

“The oil market entered a new stage of crisis on Friday—supply is starting to disappear, threatening a shortage that could quickly send prices above $100 per barrel,” my colleague Avi Salzman wrote.

Read the rest of Avi’s story here.

Watch our TV show on Fox Business Fridays at 7:30 p.m. ET and Saturdays and Sundays at 9:30 a.m. or 10:30 a.m. ET. This week, Nick Redman of Oxford Analytica on what is driving the Iran conflict and potential outcomes. Plus, an interview with Apollo chief economist Torsten Sløk.

The Hot Stock: CF Industries +4.5%
The Biggest Loser: Teradyne -10.7%

Best Sector: Consumer Staples +0.3%
Worst Sector: Consumer Discretionary -2.0%

Next week brings a double dose of inflation data, just as investors are newly worried about the risk of stagflation.

The Bureau of Labor Statistics releases the Consumer Price Index for February on Wednesday. On Friday, the Bureau of Economic Analysis will also release the Personal Consumption Expenditures Price Index for January, which was delayed by the partial government shutdown.

Other economic data next week include the National Federation of Independent Business’ Small Business Optimism Index for February on Tuesday and the BLS’ Job Openings and Labor Turnover Survey for January on Friday. Also out on Friday is the University of Michigan’s Consumer Sentiment Index for March.

The earnings tap has slowed to a trickle, but Oracle, Hewlett Packard Enterprise, Adobe, Dollar General, and Lennar are among the key firms reporting results next week.

—Connor Smith

• The Stock Market’s New Fear Is an 11-Letter Word That Crushed the Economy in the ’70s

• The Small-Cap Stock Revival May Just Be Starting. 12 Ideas to Play It.

• 6 Defense Stocks With Strong Prospects—Whether There’s War or Peace

• Salesforce Stock Might Not Be an AI Loser After All

• Plus, this weekend’s cover story: What the Iran War Really Means for the Stock Market

Join Barron’s Live on Monday at noon. Matt McLennan and his First Eagle colleagues were spot on at the start of the year in highlighting the risks of America’s twin deficits, hyperscaler spending and “geopolitical disequilibrium”—forces that continue to restrain the U.S. stock market. Barron’s Lauren Rublin and Paul La Monica speak with Matt about how he sizes up risks, where he sees the best investment values, and why it often pays to go against the crowd.

Barron’s Live features timely and actionable insights for investors. We give you behind-the-scenes conversations with the newsroom, connecting you with our editors and reporters covering the markets, the economy, and more.

Sign up here