Stocks took a hit last week as uncertainty over tariffs and their impact on the economy left investors on edge. The S&P 500 dropped over 3%, the Dow Jones Industrial Average shed more than 1,000 points, and the Nasdaq Composite fell nearly 3.5%, officially entering correction territory.
With inflation in focus, investors are closely watching key reports this week, including the Consumer Price Index (CPI) and Producer Price Index (PPI). These updates will provide insights into whether inflationary pressures are easing or if tariffs could push prices higher. Additionally, updates on inflation expectations and consumer sentiment will shape market movements in the days ahead.
On the earnings front, this will be a quieter week, with Oracle and Adobe taking the spotlight as they release their latest financial results.
Federal Reserve Holds Its Ground on Rate Cuts
The latest U.S. jobs report, released on Friday, showed that 151,000 jobs were added in February—slightly below expectations. The unemployment rate also inched up to 4.1%. Despite concerns over a slowing economy, analysts saw the report as relatively stable.
Currently, markets expect three interest rate cuts from the Federal Reserve in 2025. However, in a speech on Friday, Fed Chair Jerome Powell signaled that rate cuts are not coming anytime soon. He emphasized patience, stating, “We do not need to be in a hurry and are well-positioned to wait for greater clarity.”
With the Fed now in its blackout period ahead of its March 18-19 meeting, investors will have to wait for further signals on the central bank’s monetary policy stance.
Inflation Data: A Key Market Driver This Week
On Wednesday, the latest Consumer Price Index (CPI) report will provide an update on inflation trends. Wall Street economists expect February’s CPI to show an annual inflation rate of 2.9%, slightly down from January’s 3%. On a monthly basis, prices are projected to rise 0.3%, a slowdown from the 0.5% increase seen in January.
The core CPI, which excludes food and energy prices, is expected to increase by 3.2% year-over-year, compared to 3.3% in January. Monthly core inflation is forecasted to rise 0.3%, a slight dip from the previous month’s 0.4% increase.
According to Wells Fargo senior economist Sarah House, February’s inflation report may only provide an “initial taste” of the impact tariffs could have on price trends.
What This Means for Investors
With inflation and Federal Reserve policy at the center of market discussions, investors should brace for potential volatility. Any unexpected inflation spikes could influence Fed policy decisions and stock market trends. Additionally, the upcoming corporate earnings from Oracle and Adobe will offer insights into how companies are managing economic uncertainties.
For now, all eyes remain on inflation data and how it shapes expectations for interest rate cuts in the coming months.
