This Week's Market Outlook: Market Uncertainty Grows as Wall Street Awaits Critical Inflation Data

TLDR

Table of Contents

S&P 500 had its worst week in six months while Nasdaq entered correction territory
Trump’s tariff policies and global economic shifts are causing market volatility
Wednesday’s Consumer Price Index (CPI) report will be crucial for market direction
Investors fear potential “stagflation” – slowing growth with rising inflation
Several major companies including Oracle, Adobe, and retailers will report earnings this week

U.S. financial markets face a tense week ahead as investors look toward Wednesday’s inflation report amidst growing concerns about economic slowdown and tariff impacts. The markets ended last week on shaky ground, with the S&P 500 marking its worst performance in six months despite Friday’s modest gains.

The tech-heavy Nasdaq officially entered correction territory on Thursday. It fell more than 10% from its December all-time closing high, confirming what analysts had suspected for months.

President Trump’s fluctuating tariff policies have added to market unease. His back-and-forth implementation of new tariffs on Mexico, Canada, and China has intensified broader worries about economic health.

S&P 500 INDEX (^SPX) — S&P 500 INDEX (SPX)

Global markets were also rattled by Germany’s unexpected spending plans. These announcements drove a selloff in the benchmark German Bund, further adding to worldwide market instability.

Recent U.S. economic data has disappointed investors. One ray of hope for stock markets has been the increasing likelihood of Federal Reserve interest rate cuts later this year to counter potential growth weaknesses.

Wednesday’s Consumer Price Index (CPI) report could either strengthen or destroy those hopes. If inflation remains hot, it might force the Federal Reserve to maintain tighter monetary policy despite growth concerns.

“A hot CPI print will likely scare the market,” warned Bryant VanCronkhite, senior portfolio manager at Allspring Global Investments. “The market still wants the Fed to come to the rescue… Until inflation and inflation expectations come down, the Fed is handcuffed.”

Investors remain cautious

Investors remain cautious after January’s hotter-than-expected CPI data. Last month showed inflation rising 0.5%, marking the biggest monthly gain since August 2023.

Economists expect February’s CPI to show a more modest 0.3% increase. This inflation report will be among the final key data points before the Federal Reserve meets on March 18-19.

While the central bank is expected to keep its benchmark rate steady at 4.25%-4.5% during the upcoming meeting, futures markets suggest about 70 more basis points of easing through December 2025. This reflects growing expectations for multiple rate cuts this year.

John Velis, Americas macro strategist at BNY, noted the stakes: “Equities would not enjoy a hot CPI print because… it softens that Fed easing view that has been starting to build in the market.”

Stagflation is a growing concern

A growing concern among market watchers is the threat of “stagflation” – the harmful combination of slowing economic growth alongside rising inflation. This economic condition is feared to be toxic for a wide range of assets.

February’s jobs report showed some mixed signals. While job growth picked up, cracks are appearing in what was once a resilient labor market amid chaotic trade policies and federal spending cuts.

Washington politics remain front and center for investors. Lawmakers are working to pass a spending bill that would prevent a partial shutdown of government agencies next week.

Trade policy continues to draw market attention. Tariffs on foreign imports are expected to hurt corporate profits and raise consumer prices, though investors are weighing whether these measures are permanent or simply negotiating tactics.

On Thursday, President Trump announced that Mexico and Canada won’t face tariffs on goods covered under a prior trade deal until April 2. The announcement provided some temporary relief but added to the sense of policy unpredictability.

Market volatility has risen sharply in response to these uncertainties. The Cboe Volatility index jumped this week to its highest level since late last year.

“Volatility is here to stay for a while because we do not have economic and trade policy certainty,” said Irene Tunkel, chief U.S. equity strategist at BCA Research.

Earnings to Watch This Week

The earnings calendar adds another dimension to the week ahead. Tech giants Oracle and Adobe are scheduled to report results that could provide insights into the technology sector’s health.

Oracle will kick off the week’s earnings on Monday. Analysts expect rising revenue and profit after disappointing sales in the previous quarter. The company recently joined a $500 billion joint venture with OpenAI and other tech firms to build AI infrastructure.

Adobe follows on Wednesday. Investors will watch for signs that its AI initiatives are delivering results, especially after reporting lower-than-expected revenue last quarter and offering a weak sales outlook.

Several retailers will also report earnings this week. Dick’s Sporting Goods, Kohl’s, Ulta Beauty, Casey’s General Stores, and Dollar General are all on the calendar, offering a window into consumer spending habits amid changing trade policies and weakening confidence.

The University of Michigan’s consumer sentiment survey on Friday will provide additional context. Recent reports have shown U.S. consumers beginning to lose confidence in the economy amid tariff uncertainty and job loss fears.

Small business sentiment will also be measured through Tuesday’s NFIB optimism index. This could offer insights into how smaller enterprises are evaluating current economic conditions under the new administration.

CoreWeave, a cloud computing company backed by chipmaker Nvidia, might go public as soon as this week. This is expected to be one of the largest initial public offerings in recent years.

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