U.S. stock indices moved higher at the opening bell on Monday, marking a positive start after a three-week losing streak. The Dow Jones Industrial Average gained 148.9 points to reach 46,707.4. The S&P 500 index added 42.2 points, trading at 6,674.37, while the technology-heavy Nasdaq Composite climbed 235 points to 22,340.39. The advance was led by a rebound in technology shares, helping to ease broader market sentiment.
Investor attention is firmly fixed on the Federal Reserve, which begins its two-day policy meeting on Tuesday, March 17. Policymakers are widely anticipated to hold interest rates steady as they evaluate the economic implications of heightened geopolitical tensions, particularly concerning Iran. The central bank must assess whether these events portend weaker economic growth, persistent inflationary pressures, or a combination of both.
The gains on Monday followed a difficult session on Friday. In that trading day, the Dow declined by 119.38 points, the S&P 500 fell 40.43 points, and the Nasdaq retreated 206.62 points. The Russell 2000 index of small-cap stocks closed at its lowest level this year, and the technology sector was among the worst performers.
Commodity markets saw a notable shift, with oil prices retreating from recent highs. Brent crude futures eased by 92 cents to $102.22 per barrel. U.S. West Texas Intermediate crude experienced a sharper decline, falling $3.45 to $95.26 per barrel. Despite the daily pullback, both benchmarks have surged more than 40% this month, driven by supply disruptions near the Gulf and attacks affecting the Strait of Hormuz—a critical chokepoint for roughly one-fifth of global oil and liquefied natural gas shipments.
Recent economic data presents a mixed picture, adding to market uncertainty. The Bureau of Economic Analysis reported that the core Personal Consumption Expenditures price index, the Fed's preferred inflation gauge, rose 3.1% in January compared to a year earlier. The headline PCE index increased 2.8% year-over-year. In a separate revision, the agency lowered its estimate for fourth-quarter GDP growth to an annualized pace of 0.7%.
Market expectations for monetary policy easing have diminished significantly. The yield on the 10-year U.S. Treasury note hovered around 4.23% on Monday. According to futures pricing, the probability of an interest rate cut by the Federal Reserve in June has plummeted to just 26%, down from 69% a month ago. Kenneth Broux, a strategist at Societe Generale, noted that investors are grappling with whether the oil price shock will reignite inflation or push economies toward recession.
From a technical perspective, the short-term setup has improved modestly. Christopher Lewis, an analyst at FXEmpire, observed that the Nasdaq 100, Dow Jones 30, and S&P 500 are all rebounding from their 200-day exponential moving averages—a key trend-following indicator. Lewis identified the next resistance levels for the indices at 25,000 for the Nasdaq 100, 47,000 for the Dow, and 6,800 for the S&P 500.
Some analysts advocate for a measured response from central banks. Hyun Song Shin, chief economic adviser at the Bank for International Settlements, suggested policymakers could "look through" supply-driven energy shocks if they are transient, even as he described the recent market moves as "a very confusing picture" following oil's steep monthly gain.
However, risks to the recovery remain pronounced. Analysts at Goldman Sachs warned that a severe oil supply shock could potentially drive the S&P 500 down to around 5,400 this year—approximately 19% below Friday's closing level. A milder growth shock in the U.S. might see the index settle near 6,300. Goldman maintains a year-end target of 7,600 for the S&P 500 but cites the conflict involving Iran as a significant downside risk, especially given elevated market valuations.
As trading resumes this week, the market backdrop is less cluttered, but a definitive directional shift has yet to materialize. The Federal Reserve is not alone; the European Central Bank, the Bank of England, and the Bank of Japan are also holding policy meetings this week. This marks only the second simultaneous gathering of these four major central banks. The key question for investors is whether the recent drop in oil prices will prove durable enough for policymakers to classify it as a temporary shock rather than the precursor to a more sustained inflationary or growth crisis.
