I'm Colette Auclair and here is Schwab's early look at the markets for Friday, March 20.
Data and earnings are light today, putting focus squarely on Middle East developments with markets on track for their fourth straight week of declines. The S&P 500 Index finished Thursday below its 200-day moving average for the first time in 10 months, a technically significant bearish development.
A decline in crude oil late yesterday lifted major indexes from their intraday lows after Israeli Prime Minister Benjamin Netanyahu said Israel is helping the U.S. reopen the Strait of Hormuz, and that the war will end sooner than people think.
Before Netanyahu spoke, attacks and threatened attacks on oil and gas infrastructure put more pressure on global equities yesterday. Adding to pressure, central banks around the world kept interest rates unchanged but shared warnings about the possible impact of energy-driven inflation. Investors began penciling in possible rate hikes later this year, including chances for a Federal Reserve hike, futures markets showed.
The Fed stays in focus this weekend with Fed Chairman Jerome Powell making brief award acceptance comments at a conference Saturday afternoon. This doesn’t appear to be a likely occasion for him to touch on rates or the economy, though it's never safe to assume.
It would take a close today of 6,632.92 or above for the S&P 500 Index to avoid its fourth losing week in a row, and a close above 24,380 for the tech-focused Nasdaq 100. Both neared those levels in late trading Thursday. The 200-day moving average of 6,619 for the S&P 500 Index is another level to watch. However, traders have been notably cautious about taking bullish positions on recent Fridays, cautious ahead of weekend war developments.
Today is also "triple witching day" when contracts for stock index futures, stock index options, and stock options all expire on the same day. This may lead to greater trading activity and increased volatility. The Cboe Volatility Index, or VIX, traded just below 25 late yesterday, a level it's pivoted around most of the week.
Next week is sparse in terms of data and earnings, though the U.S. government's final estimate of fourth quarter gross domestic product, or GDP, will draw attention after it reduced its prior estimate to 0.7% from 1.4%. This reflected lower-than-expected consumer spending, which remains in focus for the first quarter.
The Atlanta Fed's GDPNow meter Thursday said first quarter GDP growth is tracking at 2.3%. That's down from the previous 2.7%, reflecting drops in residential investment and falling private inventories.
Rising prices add to weight on consumers. Inflation was a factor even before the war, as Wednesday's sizzling Producer Price Index, or PPI, revealed.
The PPI data, along with relatively hawkish Fed views released the same day, drove Treasury yields much higher toward the end of the week. The 10-year note yield again topped 4.3% at its highs on Thursday, up 10 basis points from Wednesday's lows. It settled up just two basis points for the day at 4.28%, but shorter-term yields climbed eight basis points Thursday as rate cuts grew less certain.
A narrowing yield curve, if it continues, can signal recession ahead, but the curve was negative for more than a year earlier this decade without a recession starting.
March Purchasing Manager’s Index data next week—especially input and output prices—will provide a read into inflation. Investors will likely check for signs that higher costs are being passed through to consumers, as that can impact Fed policy. The Fed projected just one rate cut in its quarterly "dot plot" the rest of the year, and raised its inflation projection.
"Notably, seven Federal Open Market Committee members have dots suggesting no cuts this year, which suggests that the Fed can take a patient approach going forward," said Collin Martin, head of fixed income research and strategy at the Schwab Center for Financial Research, or SCFR. "Prior to the war, we thought inflation would be in the driver's seat for policy over the first half of the year, and that still seems to be the case now."
Odds of a Fed rate cut this year fell from 95% a month ago to less than 35% by late Thursday, according to the CME FedWatch Tool.
Futures trading showed 3% odds of at least one rate hike this year, the first time the market has contemplated that possibility in a while. The last time the Fed raised rates was in mid-2023. It's cut rates six times over the last year and a half to the current range between 3.5% and 3.75%, the level where rates have been parked since December.
Several Treasury note auctions loom next week following relatively soft auction demand earlier this month. More of the same could drive yields even higher, suggesting investors want more payment for putting their money at risk as Congress contemplates spending what some in Washington say could be $200 billion more to fund the war. Higher spending—which would raise the U.S. deficit—hurt Treasuries, which move opposite of their yields.
Falling rate cut odds also hit the gold market, sending the metal down almost 5% Thursday and hurting shares of precious metal miners. Silver and copper also fell, hurt by worries about demand if the global economy slows. Alcoa fell 8.7% and Newmont dropped 7.5% yesterday.
Gold had climbed from below $2,000 an ounce to above $5,000 an ounce between early 2024 to early 2026, but that was in an environment where rates were falling and U.S. tariffs weighed on the dollar. Gold tends to swing the opposite way when yields and the dollar rise, as they are now.
Tensions in the Middle East intensified yesterday as the U.S. threatened Iran's energy infrastructure, which it didn't target earlier in the war.
The threats came after Iran attacked gas production fields in the Gulf region. The Trump administration also ordered more troops to the Middle East, Reuters reported, raising concern of a more prolonged conflict.
Natural gas prices in Europe spiked Thursday, and trade many times higher than natural gas in the U.S.
The central focus of the war is shifting from intensity to duration, especially as it pertains to how long traffic through the Strait of Hormuz remains disrupted.
In addition, "the spike in crude oil is raising concerns about consumer spending and corporate profit margins," said Liz Ann Sonders, chief investment strategist at SCFR, and Kevin Gordon, head of macro research and strategy at SCFR.
International benchmark Brent Crude oil prices fell about 1% Thursday to $106 per barrel after a volatile session that saw them close to $120 at one point, while U.S. benchmark WTI crude dropped 2% to just above $94 by late Thursday.
Earnings after the close Thursday included FedEx. Shares climbed about 1.5% after the delivery firm easily surpassed Wall Street's quarterly estimates and delivered better-than-expected guidance.
Major Wall Street indexes fell again Thursday to new four-month lows, but finished off their worst levels of the day. However, strength in energy was the main feature, as eight of 11 S&P 500 sectors fell. Cyclical sectors like industrials, materials, and discretionary all got punished, possibly reflecting economic worries.
Recent declines put the S&P 500's forward price-to-earnings, or P/E, ratio at 20.9, slightly below the peak of 22 earlier this year while still above the five-year average of 20. The next few weeks before earnings season kicks off are key.
"Technically, there's obviously been deterioration," said Nathan Peterson, director of derivatives research and strategy at SCFR. "The candle sticks on the charts have been shifting from 'dip buying eagerness' in early March to closing at or near the lows."
At its low Thursday, the S&P 500 fell below 6,558, not far above the near-term intraday low of 6,521.92 recorded in late November.
In individual trading Thursday, Micron fell 3% despite strong earnings and guidance. Investors appeared concerned by spending plans as the company said it expects to "step up meaningfully" in capital expenditures in fiscal 2027 to support product investments. It also expects significantly higher free cash flow in fiscal 2026.
Alibaba lost nearly 7% after the Chinese firm missed analysts' earnings estimates.
Five Below rallied 10% after the company surpassed analysts' earnings and revenue expectations and offered positive guidance.
Rivian jumped almost 3% as the EV firm announced that Uber will invest as much as $1.25 billion in Rivian to deploy as many as 50,000 robotaxis through 2031, CNBC reported.
Chip stocks gained about 1% Thursday, lifted by strength in Western Digital, Intel, and Broadcom. Some investors seem to be returning to tech during these turbulent geopolitical times after exiting the sector late last year and in early 2026. However, Nvidia, Apple and Microsoft, three of the largest tech firms, fell Thursday.
The Dow Jones Industrial Average® ($DJI) lost 203.72 points Thursday (-0.44%) to 46,021.43; the S&P 500 Index (SPX) slipped 18.21 points (-0.27%) to 6,606.49, and the Nasdaq Composite® ($COMP) fell 61.73 points (-0.28%) to 22,090.69. The S&P 500 is now down around 5% from its late January all-time closing high.