I'm Colette Auclair, and here is Schwab's early look at the markets for Thursday, March 19.
With a relatively light calendar of economic data and earnings reports today, investors will likely remain focused on the Federal Reserve's latest interest rate decision and developments in the Middle East as surging oil prices continue to weigh on markets.
The Fed surprised few if any yesterday, keeping its target range between 3.5% and 3.75%. However, policymakers saw a sticky inflation picture grow even stickier due to a hot February Producer Price Index (PPI) report and escalating attacks on energy infrastructure in Iran.
The central bank's "dot plot," which shows Fed officials' estimates for interest rates, pointed to rates remaining steady this year, and just one rate cut in 2027. Meanwhile, its latest economic projections revealed a slight rise in officials' inflation expectations for this year and next. While stagflation—the toxic economic combination of elevated inflation and weak economic growth—has been a concern for some investors this year, Fed officials also raised their gross domestic product, or GDP, forecasts for 2026.
"Despite fears of stagflation given the potential impact from the war in Iran, updated Fed projections don't suggest that's the case," said Collin Martin, head of fixed income research and strategy at the Schwab Center for Financial Research, or SCFR. "But these projections could end up being moot points if the war goes on longer than expected. We'll be watching for comments on potential downside risks to the economy from a prolonged conflict and what that means for monetary policy."
The Fed's decision and forecasts yesterday came after the Bureau of Labor Statistics revealed in the morning that there was a broad-based increase in producer prices last month. February PPI rose 0.7%, well above the consensus estimate for 0.3%. Core PPI—which excludes food and energy—surged 0.5% versus the 0.4% Briefing.com consensus. On an annual basis, PPI rose 3.4% in February, the highest in a year and well above consensus estimates for 2.9%, while core prices rose 3.9% year over year.
The scorching February PPI spooked investors, especially since it reflected a time before the war sent crude prices sky high.
"Nearly every category saw an increase," said Kevin Gordon, head of macro research and strategy at SCFR, warning that "PPI components that map over to PCE suggest another firm PCE print for February.”
The Personal Consumption Expenditures, or PCE, price index, is the inflation metric most closely watched by the Fed. On March 13, January's PCE data showed consumer prices rising 3.1% from a year ago. Air transport and inpatient hospital care were among categories that rose sharply. February's PCE report, which has been delayed due to the government shutdown, will come out April 9.
March Purchasing Manager's Index data next week—especially input and output prices—will provide a read into inflation prior to that report. Investors will be closely watching for signs that higher costs are being passed through to consumers since that can impact Fed policy.
The odds of a Fed rate cut this year fell from 70% to below 55% on Wednesday, according to the CME FedWatch Tool. They were 95% a month ago.
Tensions in the Middle East also continued to rise yesterday after Israel struck Iran's South Pars field, the largest natural gas field in the world, leading Iran to threaten retaliation against energy infrastructure across the Gulf.
International benchmark Brent Crude oil prices rose above $109 per barrel after the news broke, while U.S. benchmark WTI crude hit $98 a barrel. In an effort to quell oil's rise, President Trump suspended the Jones Act for 60 days. Signed into law in 1920, the Jones Act requires all goods transported between U.S. ports to be carried by U.S. built, owned, flagged, and crewed vessels.
Around the world, central banks continue to wrestle with upside risks to inflation and downside risks to growth amid the conflict in the Middle East. "However, assuming higher prices don't spill over into wages, higher inflation may not last if recession risks grow," said Michelle Gibley, director of international equity research and strategy at SCFR.
Today's economic data highlights include initial jobless claims, new homes sales, and the Philadelphia Fed's manufacturing survey. The Bank of Japan and the European Central Bank will also announce their interest rate decisions. Both are expected to keep rates unchanged, Gibley noted.
Shifting to U.S. market news, several key earnings reports await investors today. China's e-commerce leader Alibaba, the consulting giant Accenture, and Darden Restaurants, which operates popular dining brands including Olive Garden and LongHorn Steakhouse, are all set to report this morning. FedEx will then be in the limelight this afternoon. The company could be worth special attention considering how closely its business is tied to energy prices and general consumer demand.
Last month, FedEx guided above analysts' expectations for fiscal third-quarter earnings, citing an "exceptional" holiday season, CNBC reported. That was before crude oil prices spiked, however. Today, investors will likely want to hear the company's views on navigating this new energy environment and how it plans to protect margins.
Notable earnings reports yesterday included the packaged foods company General Mills and the home furnishings retailer Williams Sonoma. General Mills missed earnings estimates and saw its quarterly sales fall more than 8% year-over-year, while Williams Sonoma topped earnings estimates and hiked its dividend by double digits.
Micron Technology also reported earnings yesterday afternoon after a blistering 350% rally in its shares over the last year. The memory chip giant turned in record quarterly revenue of $23.86 billion, blowing past estimates for $20.1 billion in revenue. Adjusted EPS came in at $12.20 versus the expected $9.31. The company also guided for revenues of $33.5 billion next quarter and adjusted EPS of $19.15. Shares rose in early after-hours trading.
After relatively robust earnings results so far this year, forecasters largely remain optimistic about earnings growth and U.S. markets, despite persistent inflation concerns and geopolitical risks.
For the calendar year, FactSet forecasts annual S&P 500 earnings growth of 15.3%, up slightly from the average estimate of 14.9% last December 31. Wall Street analysts generally haven't budged from their end-of-year S&P 500 price projections either, most of which pencil in a solid rally from here.
Though inflation continues surging along with oil prices, a Bloomberg survey of analysts this week showed the average estimate for U.S. 2026 GDP growth has remained healthy at 2.5%. GDP rose at a seasonally and inflation-adjusted annual rate of just 0.7% in the fourth quarter of last year, according to the government's second estimate.
Major Wall Street indexes all ended Wednesday firmly in the red. Ten out of 11 S&P 500 sectors fell on the day, with energy leading while consumer staples and consumer discretionary lagged.
Looking at market breadth, although markets have remained resilient in recent weeks, participation remains limited. On Wednesday, just 47% of S&P 500 stocks traded above their 200-day moving average, while only 29% traded above their 50-day moving average.
In individual trading Wednesday, the optical and photonics company Lumentum surged 7.9% after it showcased new AI data center technologies at an industry conference. The company also revealed a multi-year partnership with Nvidia earlier this month.
Macy's rallied on earnings, climbing 4.7%. The department store operator beat analysts' quarterly earnings and revenue estimates but guided for below consensus fiscal 2027 EPS. It expects revenue for the fiscal year of $7.64 billion, above the $7.52 billion FactSet consensus.
With bitcoin falling nearly 4% amid a slightly more hawkish Fed outlook, shares of the software firm turned bitcoin treasury company Strategy plummeted 6.5%.
The advertising giant Trade Desk also continued its two-day slide, slipping another 6.1% after a damaging audit report from Publicis earlier in the week raised questions about its billing practices.
The Dow Jones Industrial Average® ($DJI) sank 768.11 points Wednesday (-1.63%) to 46,225.15; the S&P 500 Index (SPX) fell 91.39 points (-1.36%) to 6,624.70, and the Nasdaq Composite® ($COMP) dropped 327.11 points (-1.46%) to 22,152.42.