Wall Street Week Ahead: Inflation in focus for markets jostled by Middle East war signals
Why it matters: The March CPI report on April 10 will test the war's energy shock, with U.S. crude up 90% this year.
- S&P 500 posted a gain in a holiday-shortened week, snapping a five-week losing streak, despite closing its worst-performing quarter since 2022.
- Matthew Miskin of Manulife John Hancock Investments states that the market remains myopically focused on geopolitical risks and oil prices, which are hard to ignore.
- U.S. crude topped $110 a barrel on Thursday, after settling above $100 a barrel earlier in the week for the first time since 2022, with Doug Huber of Wealth Enhancement Group noting that inflation expectations and bond markets are tied to oil's performance.
- U.S. average gasoline price rose above $4 a gallon this week for the first time in over three years, with BNP Paribas expecting the March CPI report to reflect this initial pass-through of oil prices.
- March CPI report, due April 10, is expected to climb 0.9% monthly, with the 'core' CPI rising 0.3%, though Miskin suggests broader inflationary ripple effects may not be fully visible yet.
- War-driven inflation worries have led markets to largely rule out interest rate cuts this year, which were previously a key underpinning for bullish stock outlooks, according to Patrick Ryan of Madison Investments.
Wall Street is grappling with conflicting signals regarding the Middle East war, which has driven oil prices to over $110 a barrel and pushed U.S. gasoline above $4 a gallon, ending the S&P 500's five-week losing streak but fueling inflation concerns. Investors are now keenly focused on the upcoming CPI report, which is expected to show a significant jump in March due to energy costs, potentially ruling out anticipated interest rate cuts this year.
