U.S. equity markets finished the last trading week with mixed returns as geopolitical developments in the Middle East and inflation readings remained central to investor focus. The S&P 500 slipped 0.11% to close at 6,816.89 but nonetheless posted a solid weekly advance. The Nasdaq Composite rose 0.35% to 22,902.89, supported by gains in large semiconductor names including Nvidia and Broadcom, while the Dow Jones Industrial Average declined 269.23 points, or 0.56%, to 47,916.57.
Across the week, the major indexes produced their best weekly performance since November: the S&P 500 rose about 3.6%, the Nasdaq advanced roughly 4.7%, and the Dow gained 3.0%. Those gains took place as market participants weighed a delicate two-week pause in hostilities between the U.S. and Iran.
Inflation and energy dynamics
Inflation remained a focal point for investors over the period. The consumer price index for March matched expectations with a 0.9% month-on-month increase and an annual rate of 3.3%. Within that report, energy costs were a notable driver, jumping 10.9% during the month - a move attributed in the market commentary to the effects of the Middle East conflict on supply and risk perceptions.
Oil prices reacted to the geopolitical backdrop. After U.S.-Iran negotiations broke down, oil climbed back above $100 a barrel when the U.S. announced measures to limit maritime traffic through the Strait of Hormuz. That escalation of maritime restrictions culminated in President Donald Trump saying the U.S. Navy would begin blockading the strait, a step described by market participants as putting the ceasefire at risk and prompting warnings that fuel prices could remain elevated into November's midterm elections.
Economic calendar and Fed commentary ahead
Traders will also have a steady stream of domestic economic data to consider in the coming days. The producer price index (PPI) is scheduled for Tuesday, initial jobless claims are due on Thursday, and several Federal Reserve officials are slated to speak across the week. Those releases and remarks could influence expectations for monetary policy, particularly in the context of recent inflation prints and elevated energy prices.
First-quarter earnings season opens
Capital markets will shift further toward corporate fundamentals as first-quarter earnings season commences. The reporting cycle begins with major U.S. banks, which analysts say have helped underpin recent bullish sentiment for equities. High-profile earnings reports expected next week include Netflix, Johnson & Johnson, and PepsiCo. By the end of next Friday, roughly 10% of S&P 500 companies are projected to have reported results, with the majority of announcements arriving in the weeks that follow.
Analysts aggregated by LSEG IBES expect S&P 500 earnings to have expanded about 14% compared with the same quarter a year earlier. That backdrop will be watched closely by investors looking for evidence that corporate profitability has held up in the face of higher energy costs and the uncertainty stemming from the Middle East war.
How strategists are framing the outlook
Market strategists highlighted the elevated uncertainty surrounding the path of the geopolitical conflict and its implications for the economy and corporate profits. RBC Capital Markets strategists led by Lori Calvasina noted that the reporting season represents an "important phase of the discovery process for how the war will ultimately impact the U.S. economy and company profitability." They emphasized that forecasting uncertainty is unusually high and is likely to remain so for an extended period.
RBC further suggested that their models point to the S&P 500 remaining on a trajectory toward 7,750 over the next year, supported by a potential recovery in investor sentiment from deeply bearish levels and solid earnings and economic fundamentals, provided the recent disruptions to energy markets and the Middle East do not cause outsized damage.
Wolfe Research cautioned that the market could see renewed volatility following the announcement of a naval blockade of the Strait of Hormuz. The firm said the blockade would likely reverse some of the equity market gains and higher oil prices recorded over recent weeks, though Wolfe expressed confidence that the S&P 500's bottom of 6,343 is established and would recommend adding to risk exposures on market weakness.
JPMorgan advised investors that geopolitical risks remain and that markets could weaken if the conflict escalates. The firm maintained that longer-term investors with 3/6/12 month horizons should view market dips as buying opportunities, arguing against adopting overly bearish positions that risk whipsaw losses, and noting the historical tendency for military conflicts to produce fat tails and elevated volatility.
Morgan Stanley observed that the S&P 500 had been carving out a low after finding support near the low end of their targeted correction range of 6,300-6,500. The firm noted that stalled peace talks and central bank attention on inflation could prompt markets to retrace and potentially retest parts of that range, but nonetheless advised readiness to add risk as opportunities arise because "the market waits for no one."
What to watch this week
- Progress of first-quarter earnings, beginning with major banks and followed by companies such as Netflix, Johnson & Johnson, and PepsiCo.
- Economic prints including PPI and initial jobless claims, along with comments from Federal Reserve officials.
- Developments in the Middle East, particularly actions affecting the Strait of Hormuz and energy markets, which could influence inflation, oil prices, and broader market sentiment.
Investors will be balancing near-term geopolitical risk, inflationary signals, and incoming corporate results as they assess positioning for the remainder of the quarter.