Markets
Stocks logged a third straight down week as investors digested the latest news out of the Middle East, navigated increased volatility, and mulled over recent economic data.
The Standard & Poor’s 500 Index declined 1.60 percent, while the Nasdaq Composite Index lost 1.26 percent. The Dow Jones Industrial Average fell 1.99 percent. The MSCI EAFE Index, which tracks developed overseas stock markets, slid 2.28 percent.¹²
Middle East… escalating
Markets got off to a volatile start to the week, with stocks falling and oil prices rising as commercial maritime traffic heading out of the Persian Gulf through the Strait of Hormuz remained at a virtual standstill. However, stocks rebounded later in the day after the White House indicated the conflict may end sooner than expected.³
Stocks dropped at Tuesday’s opening bell but mostly recovered after reports that a group of countries, including the U.S., were considering a coordinated release of strategic oil reserves to counter supply disruptions. Markets generally moved sideways midweek as news that the Consumer Price Index (CPI) held steady last month buoyed investor sentiment.⁴⁵
As the week progressed, all three major averages declined, and oil prices hit all-time closing highs. Investors grew increasingly concerned about the impact of oil supply disruptions on the broader global economy, with the Strait of Hormuz remaining a key risk. Bond yields rose as investors anticipated that a prolonged conflict would keep oil prices elevated, increasing the likelihood of higher inflation.⁶
Market sentiment remained weak as the week wrapped up, though declines moderated despite a downward revision to Q4 gross domestic product (GDP) growth.⁷
Stubborn Inflation Remains ‘Sticky’
With all the updates on the Middle East conflict, it was easy to overlook other news last week.
Wednesday’s report showing that CPI remained unchanged in February over the prior 12 months was encouraging. However, it reflected inflation data from before the conflict in the Middle East began. Friday’s Personal Consumption & Expenditures (PCE) Index, the Fed’s preferred inflation measure, indicated that consumer prices remained sticky in January. Investors largely took this report in stride, as delayed data tends to have less market impact over time.
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