The Fed’s next steps remain unclear following last week’s Federal Open Market Committee (FOMC) meeting.
Entering the final trading week of March, investors are weighing signals from the Federal Reserve, upcoming trade policy changes, and key economic data releases.
At last week’s FOMC meeting, the central bank held interest rates steady and reiterated expectations for two rate cuts this year. However, chair Jerome Powell maintained that policy is in a “good place” and the Fed is in “no hurry” to adjust rates.
“On balance, we interpreted Powell's comments as leaning somewhat dovish, in contrast to the shift in the dots,” Deutsche Bank analysts wrote.
Despite Powell’s somewhat dovish tone, the Fed’s Summary of Economic Projections showed a slight upward shift in the “dot plot,” suggesting that some policymakers see a slower path to rate cuts. Deutsche Bank analysts suggest that this week’s remarks from Fed officials, including speeches by Atlanta Fed President Raphael Bostic and St. Louis Fed’s Alberto Musalem, could provide additional clarity.
Key data releases this week include consumer sentiment readings on Tuesday, durable goods orders on Wednesday, and the latest figures for personal income and consumption on Friday. The core Personal Consumption Expenditures (PCE) deflator, the Fed’s preferred inflation gauge, is expected to rise 0.37% month-over-month, pushing the annual rate to 2.8%. If inflation continues to surprise on the upside, it could complicate the Fed’s timeline for rate cuts.
Tariff concerns: overblown or a looming threat?
With the Trump administration set to announce reciprocal tariffs on April 2, global markets remain on edge.
XTB research director Kathleen Brooks noted that while initial fears over sweeping trade restrictions have weighed on equities, recent reports suggest that the tariffs may be more targeted than initially expected, leading to a rebound in US equity futures.
“The tariffs for April 2 are now likely to be less sprawling and not a fully global event,” Brooks wrote.
However, uncertainty remains. Deutsche Bank estimates that trade policy uncertainty could reduce GDP growth by 0.75 percentage points through mid-2026. If uncertainty persists, the impact could be significantly larger. Recent trade data suggest an uptick in imports, particularly pharmaceuticals from Ireland, as companies brace for potential disruptions.
Stock market at a crossroads
Last week, stocks staged a late rally, fueled by gains in major tech stocks. Tesla jumped more than 5% on Friday, while Nvidia struggled, falling 4% for the week. Despite the recovery, Brooks warns that this may be a temporary pause rather than a sustained rebound.
If fears surrounding tariffs subside, some analysts suggest the sell-off in tech stocks may have been overdone, potentially setting the stage for a renewed rally.
Economic data to watch
- Tuesday: Consumer Sentiment Index
- Wednesday: Durable Goods Orders
- Thursday: Final Q4 GDP and Trade Balance Data
- Friday: Core PCE Inflation Data
Earnings on deck
- Monday: Oklo
- Tuesday: GameStop
- Wednesday: Dollar Tree
- Thursday: lululemon