Key Points
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The stock market declined today due to investors waiting for the FOMC meeting.
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Middle East instability has started again, and fears of a regional war are becoming a drag for stocks.
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The U.S. production data fell short of consensus estimates.
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The stock market has started to decline today after a recovery on Friday last week and a smaller recovery on Monday. This is mostly due to the market pricing in the soft macroeconomic data that came out this month, along with a lack of clarity regarding the Federal Open Market Committee (FOMC) meeting from March 18-19.
Moreover, geopolitical events have also caused more negative sentiment. Earlier strikes on Yemen and the ceasefire collapsing in Gaza could lead to further instability in the Middle East.
Here’s a market update as of 10:00 A.M (ET) today.
- The S&P 500 is down 60.77 points, or 1.07%.
- The Nasdaq Composite is down 328.8 points, or 1.84%.
- Dow Jones Industrial Average is down 231.1 points, or 0.55%.
Investors Wait for the FOMC Meeting’s Results
The Fed will be meeting today and on Wednesday. Jerome Powell will likely offer more clarity on the direction of the U.S. economy. Inflation came in cooler, and while this was seen as a positive thing, the news could turn sour if most other macro metrics have also come in soft. This usually precedes an economic slowdown, so many expect the Fed to announce interest rate cuts due to the cooling numbers.
The Fed also has to navigate tariffs and their impact on the economy. If tariffs start pushing up inflation, as expected by UMich, this could induce stagflation due to the broader economy slowing down.
U.S. Production Data Misses
U.S. production data for February came in lower than expected year-over-year at 1.44% vs. 2.3% expected. In January, this was 2%. The data was quite negative around the end of 2024, and the recent growth figures are more of a bump. However, given that the growth rate has missed estimates, it’ll likely reinforce fears of the economy cooling down.
Manufacturing production still topped estimates. U.S. Feb manufacturing production rose 0.9% month-over-month vs. 0.3% expected.
Geopolitical Developments Impacting the Market
- Ceasefire Collapses in Gaza: The Gaza ceasefire collapsed overnight, and it restarted fears of a larger regional war in the Middle East.
- Tariffs: U.S. officials still seem committed to reciprocal tariff policies. They are weighing using a three-tier tariff system to sort trading partners as it would be difficult to devise tariffs for each country individually.
- Global Growth Cut: Fitch forecasts lower growth globally due to trade wars.
Alternative Assets
Investors have been piling into alternative assets due to the elevated risk environment. Among these alternative assets, gold leads again today.
- Gold: Gold futures have gained over 1.26% today due to geopolitical and tariff-related risks.
- Bitcoin Down: Unlike gold, investors do not see Bitcoin as a safe haven. It has declined along with the rest of the market today.
- Crude Oil: Crude oil climbed due to Middle East tensions.
- Natural Gas: Natural gas ended its losing streak and climbed due to Middle East tensions.
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