MW Stocks face Iran jitters and a crucial jobs report in the week ahead as AI layoffs loom large
By Christine Idzelis
'You've got this somewhat dystopian narrative permeating the psychology of the market' with respect to AI and jobs, CIO says
Investors will hope for a limited Iran conflict and a strong U.S. jobs report in the week ahead.
Investors will be forced to navigate turbulence tied to the Iran conflict in the week ahead. But the S&P 500 already was teetering ahead of a crucial jobs report, with angst intensifying over the potential for artificial intelligence to drive sweeping layoffs.
Now, worries about the weekend's U.S.-Israel attack on Iran look ripe to collide with fears of a labor market that could be weaker than it has appeared on the surface.
As Ryan Detrick, chief market strategist at the Carson Group, said to MarketWatch on Saturday: "To think we are going to have a calm start to March probably isn't on anyone's bingo card."
Investors were startled Friday by Block's (XYZ) newly unveiled plan for massive layoffs. That intensified the drama around hopes that AI will lead to productivity gains that benefit corporate profits and fears that job losses will hurt the consumer spending that drives U.S. economic growth.
That's why Friday's employment report will be a key catalyst for the stock market, after a Big Tech selloff led to consolidation for the S&P 500 SPX, said Adam Turnquist, chief technical strategist for LPL Financial.
While the benchmark large-cap index was less than 2% away from its record high, it has yet to close above the 7,000 mark. Yet, from a technical perspective, the helpful rotations under its hood might be running out of steam without a rebound in Big Tech. That raises the stakes for the February jobs report, as it could drive the top-heavy S&P 500 to finally break through its recent trading range, up or down.
The S&P 500 may be vulnerable to downside risk as the percentage of stocks outperforming the index this year has been high, at more than 60% - a peak level compared with the past 20 years, according to Turnquist. That suggests breadth might not have much more room to strengthen and help prop up the index should Big Tech companies continue to struggle.
The S&P 500's retreat in February has put its year-to-date gain in jeopardy, with the index now up just 0.5% in 2026. If cracks in the labor market widen, it could lead to a slowdown in consumer spending and prompt investors to reconsider whether high valuations in the stock market are justified.
There's also the risk the Iran conflict creates a spike in oil prices (CL00) (BRN00) and causes Americans to pay more - or even a lot more - at the gas pump.
Read: Iran conflict risks Strait of Hormuz standstill and sparks talk of $100-a-barrel crude oil
Whether the Middle East conflict drags on or ends swiftly remains an open question, but fear about the rapidly evolving AI landscape will linger.
"You've got this somewhat dystopian narrative permeating the psychology of the market at this point with the whole potential disruption" of the labor market brought on by artificial intelligence, said James St. Aubin, chief investment officer at Ocean Park Asset Management, in an interview. Even if it has not yet shown up broadly in the data, he said, anecdotes about "big layoffs because AI can do all these jobs now" are hanging over the stock market.
A solid labor market "perpetuates consumer spending, but it can work in reverse, too," he cautioned. St. Aubin said he worries that healthcare may be holding up the labor market in terms of growth in jobs, and that job openings may be drying up.
Yet for all the unease over AI coming for white-collar jobs in software and beyond, investors may in some cases reward companies for newfound efficiencies ushered in by the technology.
Block CEO Jack Dorsey's shareholder letter pointed to "intelligence tools" as helping the company do more with a dramatically smaller number of employees. Shares of Block, the parent company of Square and Cash App, surged almost 17% Friday. By contrast, major U.S. stock indexes fell in the week's closing session as heavy selling continued in the technology sector.
The S&P 500 ended 0.4% lower on Friday, while the Dow Jones Industrial Average DJIA slid 1.1% and the tech-heavy Nasdaq Composite COMP fell 0.9%, according to Dow Jones Market Data. The S&P 500 saw a weekly loss of 0.4%, while its technology sector XX:SP500.45 fell 2.2% on the week.
Joy Wiltermuth contributed.
-Christine Idzelis
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March 01, 2026 12:00 ET (17:00 GMT)
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