In Microsoft Purview Information Protection, sensitivity labels are the core mechanism to classify and protect content. The Microsoft SCI learning content explains that a sensitivity label can “apply protection such as encryption and rights restrictions to files and emails,” allowing you to define who can access the content and what they can do (view, edit, print, forward). When you configure a label with Encrypt settings, the service uses Azure Rights Management to enforce protection persistently, so the encryption travels with the file wherever it goes.

Labels can also apply content marking. The official guidance states that labels can “add visual markings—headers and footers—to Office files and email to make the sensitivity of content obvious.” This is commonly used to stamp messages and documents with text such as Confidential or Internal. SCI materials further clarify that labels can apply watermarks to Office documents (Word, Excel, PowerPoint) as part of content marking, but watermarks are not applied to email messages; only headers and footers are supported for email.

Putting it together: encryption (Yes) and headers/footers on documents (Yes) are supported label actions. Watermarks are supported for documents but not for email, so “Sensitivity labels can apply watermarks to emails” is No.