The major averages posted their fourth losing week in a row. The S&P 500 has held up better than the other benchmarks, down just 7% from its recent high, as rising oil prices, an increase in Treasury yields, and ongoing Iran war headlines weighed negatively on investor sentiment.
The small-cap Russell 2000 declined more than 2% and slipped into correction territory — that is, a 10% decline from its latest high. At their lows of the day, the Dow and Nasdaq traded in correction territory, but ultimately closed shy of the 10% threshold.
Crude prices topped $112 on Friday after Iraq declared a force majeure at all oilfields operated by foreign companies and drones struck two refineries in Kuwait.
Fourth-quarter (Q4) earnings wrapped up with S&P 500 index earnings growing 13.6% versus the expected 8.6% Bloomberg consensus estimate. The industrial and materials sectors saw notable earnings gains beyond consensus estimates (34.9% versus an expected 4.6% and 24.1% versus 8.6%, respectively).
The Federal Open Market Committee (FOMC) meeting concluded with officials deciding to leave the target Federal funds rate unchanged, acknowledging heightened uncertainty with inflation and the Iran war.
Inflation concerns were reflected in the bond market, with two-year, 10-year, and 30-year Treasury yields moving higher. February’s Producer Price Index (PPI) demonstrated further evidence of upstream price pressures, while February industrial production and January factory orders both exhibited modest gains, consistent with steady economic momentum.
This week, investors will continue to monitor developing news related to the Iran war. It will be a relatively light week of economic data, with updates including services and manufacturing Purchasing Managers Indexes (PMIs) and construction spending.
If you click the Looking Ahead link below, you will find a report written by Wells Fargo. Below are excerpts from that research.
Week in review: March 16-20
Economic data
- The FOMC policy decision last Wednesday left the target federal funds rate unchanged at 3.50% – 3.75%, with the updated Summary of Economic Projections still showing one rate cut before year-end 2026.
- Fed chair, Jerome Powell, stated that he will continue to lead until his presumed successor, Kevin Warsh, is confirmed.
- February’s PPI data indicated continued acceleration of inflation pressures, further complicating the path of Fed policy in the coming year.
- Core PPI rose 0.5% month-over-month, and the headline print’s 0.7% gain represented the highest month-over-month increase since July 2025. Overall, this represents the fourth straight acceleration of month-over-month inflation at the wholesale level.
- On a yearly basis, The headline and core prints accelerated to 3.4% and 3.9%, respectively.
- The main drivers included food prices, as well as a strong uptick in energy and services.
- Industrial production for February saw a mild increase of 0.2% in comparison to 0.7% in January, mainly supported by rising production in electrical equipment and motor vehicle parts productions.
- New factory orders for January rose 0.1%, an improvement from December’s 0.4% decline. Key contributors included an increase in computers and electronic products.
- Housing market data supported the idea that we are currently in a buyers market, with the number of U.S. home sellers far exceeding the number of buyers.
- Home sales for January fell sharply to an annualized 58.7 K, the lowest reading since October 2022. However, February pending home sales surprised to the upside with a solid 1.8% month-over-month increase, driven by somewhat improved affordability conditions.
- The National Association of Home Builders Housing Market Index increased by one point in March, likely related to lower mortgage rates, though rising oil prices could push rates higher and reverse this progress.
Looking Ahead to this week: March 23-27
U.S.
- This week will include a first look at S&P Global’s March PMIs for both the manufacturing and service sectors on Tuesday as well as the Q4 current account balance, January construction spending, February Import and Export Price Indexes, and finalized March consumer sentiment and inflation expectations survey from the University of Michigan.
- Rounding out the docket are finalized, Q4 non-form productivity and unit labor costs, the Fed bank of Chicago’s February National Activity Index, and measures of March economic activity from the Philadelphia, Richmond, and Kansas City regional Fed banks.
- Investors will also be watching for any developments in the Iran war and its impact on the global oil market.
- In the auction space, the US Treasury Department issues $211 billion in two-, five-, and seven-year notes.
Asia
- In China, the focus of an otherwise data-light week will be the February industrial profits
- From Japan, look for preliminary March PMIs and February’s national Consumer Price Index (CPI), services PPI, and department store sales.
- Elsewhere in the region, South Korea’s March consumer confidence and February PPI, and retail sales hit the tape, along with Australia’s February CPI and preliminary March PMIs.
Europe
- The highlight will be regional preliminary March PMIs and consumer confidence readings.
- From France, watch for March manufacturing confidence, while German releases include March’s IFO business climate survey and February’s Import Price Index and retail sales.
- Also be on the lookout for the U.K. ‘s CPI, a companion Retail Price Index, PPI, and retail sales, along with January‘s house price index. Meanwhile, G7 foreign ministers will meet in France toward the end of the week.
