Hot PPI Scorches Early Rally Attempt Ahead of Fed

Published as of: March 18, 2026, 9:13 a.m. ET

(Wednesday market open) With a Federal Reserve decision directly ahead and no rate change anticipated, investors mull another hot Producer Price Index (PPI) report and cast a wary eye at crude oil and the Middle East. Headline February PPI spiked 0.7% compared with the 0.3% consensus. Stocks fell after PPI and crude steadied amid continued Iranian attacks on Gulf states. Wall Street often treads water heading into rate announcements.

Today brings a new set of Fed economic projections and a look at the possible rate path, all released along with the rate decision at 2 p.m. ET and followed shortly by Fed Chairman Jerome Powell's press conference. In the last "dot plot" of rates issued in December, Fed policymakers predicted a single rate cut this year. Any evolution of that—either to no change or even a possible rise—would be notable today. So would any comments Powell makes about his future at the Fed, considering his term as chairman ends in May but his tenure on the board of governors extends beyond that. Analysts expect the Fed to hold rates in the current range of 3.5% to 3.75% for the second straight meeting after three cuts late last year.

On Tuesday, major indexes rebounded despite another rise in crude and Iranian attacks on tankers and regional oil infrastructure. The Bank of Japan (BoJ) and European Central Bank (ECB) deliver rate decisions tonight and tomorrow morning, U.S. time. Most key central banks are on hold amid growing risks of stagflation. "There is a nonlinear impact of energy supply disruption—each day of disruption is multiple days before things return to normal," said Michelle Gibley, director of international equity research and strategy at the Schwab Center for Financial Research (SCFR).

1. PPI deeper dive: February PPI, which tracks wholesale prices, didn't bring any sign of cooling and may reflect U.S. tariffs, among other factors. Core PPI—which excludes food and energy—surged 0.5% versus the 0.4% Briefing.com consensus. "PPI components that map over to PCE suggest another firm PCE print for February," said Kevin Gordon, head of macro research and strategy at SCFR. "Nearly every category saw an increase." Air transport and inpatient hospital care were among categories rising sharply last month. The Personal Consumption Expenditures (PCE) price index, due late next week, is the inflation metric most closely watched by the Fed. Today's numbers compared with January's surprisingly hot 0.5% and 0.8% headline and core readings. Annual PPI rose 3.4% in February, the highest in a year and well above consensus of 2.9%. Core prices rose 3.9% year over year. Chances of a Fed rate cut this year fell to 65% from 70% soon after the PPI data, according to the CME FedWatch Tool. It was 95% a month ago. Around the world, central banks continue to wrestle with upside to inflation and downside to growth. "However, assuming higher prices don't spill over into wages, higher inflation may not last if recession risks grow," my colleague Gibley noted.
    
2. Inflation, jobs watched closely in Fed outlook: Oil might have to stay elevated beyond a single Fed meeting before policymakers start incorporating its impact into longer-term inflation expectations. The Fed's last projection was for a 2.4% annual rise in the 2026 PCE. However, the January core PCE figure, which subtracts volatile food and energy prices, was 3.1% on an annual basis, up from 3% in December. So PCE prices were heading the opposite direction of the Fed's goal even before the war began. At the same time, jobs growth fell 92,000 in February. This puts the Fed in a pickle and is why today's Fed unemployment projection might get special attention. Last time out, the Fed pegged U.S. 2026 unemployment at 4.4%, which is exactly where it stood in February. One projection that jumped sharply in December was U.S. gross domestic product growth, which the Fed raised to 2.3% in 2026 from its previous 1.8%. While there aren't any numbers yet for the current quarter, a drop in the government's estimate for fourth quarter GDP to just 0.7% doesn't bode well.
    
3. Daily distractions mount, earnings still count: Amid war news, AI jitters, oil prices, and central bank meetings, the market seems distracted from earnings. Ultimately, geopolitical circumstances come and go, but earnings are the true north. Though there's debate whether the war and higher oil might eventually take a bite out of 2026 S&P 500 earnings growth, it's not evident yet in analysts' estimates. For the calendar year, FactSet pegs annual earnings growth at 15.3%, up slightly from the average estimate of 14.9% heading into the year. Wall Street analysts generally haven't budged from their end-of-year S&P 500 Index projections, most of which pencil in a solid rally from here. Annual tech earnings are now seen at a robust 33.5%, up from 28.6% on December 31, though analysts have lowered their estimates for earnings growth this year in every sector besides materials and tech since December 31. In a related development, the Securities and Exchange Commission (SEC) is preparing a proposal to eliminate the quarterly earnings requirement for public companies and give them the option to report just twice a year, The Wall Street Journal reported.

• Memory chip giant Micron (MU) climbed nearly 2% ahead of earnings due later today and is up 350% over the last year. Booming data center demand and product shortages that raised prices have sent shares of the memory segment soaring. Last time out, Micron easily beat analyst's quarterly expectations while forecasting quarterly revenue of $18.7 billion and earnings per share of about $8.42 on an adjusted basis.
   
• Shares of Western Digital (WDC) climbed nearly 10%, while Seagate Technology (STX) rose 5% early today, possibly lifted by optimism about the memory storage sector heading into Micron's earnings later.
   
• Macy's (M) got a spark from its earnings, rallying nearly 9% ahead of the open. The department store operator beat analysts' quarterly earnings and revenue estimates but guided for fiscal 2027 EPS below consensus. It expects revenue for the fiscal year of $7.64 billion, above the $7.52 billion FactSet consensus.
   
• Nvidia (NVDA) edged up close to 1% following a Reuters report that the company once again has permission to sell its H200 chip in China and another Reuters article noting that Nvidia is preparing a version of its Groq AI chips to sell in China. Nvidia's GTC conference hasn't changed things for a stock that's been stuck in the mud since last October. Despite upbeat product announcements, concern centers on Nvidia's sky-high margins and how they can be maintained amid growing competition.
   
• Lululemon (LULU) fell nearly 1% despite beating consensus earnings expectations. Its guidance was below consensus, likely the reason shares are down.
   
• Tuesday's rally embraced eight of 11 S&P 500 sectors following Monday's green-across-the-board session. Energy soared to the top of the scorecard Tuesday, followed by consumer discretionary, communication services, and financials. Market resilience continues, but participation is limited—energy and utilities lead while financials and discretionary lag.
   
• Crude (/CL) dropped below $95 a barrel this morning after Reuters reported that the Iraqi government and Kurdish authorities have reached a deal to resume oil exports via Turkey's Ceyhan port. Gulf exporters are also getting oil out of the region through pipelines to bypass the blocked Strait of Hormuz, Reuters said.
   
• From a technical angle, major indexes keep showing resilience after flirting with or falling below key support late last week at 200-day moving averages. Those averages are 22,208 for the Nasdaq Composite and 6,612 for the S&P 500 Index.

Short approach: Want to know which major stocks have elevated or rising short interest?  Take a look at Schwab's latest Short Interest Monitor—based on data from the Financial Industry Regulatory Authority (FINRA) and Schwab.com. 

Cboe Volatility Index futures (/VX) remain elevated looking ahead to the rest of the year, as this chart of futures values shows. However, the today's futures curve (red line) doesn't end up much different by year-end than the curve in late February (yellow line) before the war when investors were already nervous about tariffs and other issues. Today's futures market doesn't plug in a significant rise to levels of 30 or above, but geopolitical events sometimes can't be foreseen, and the elevated curve suggests investors remain cautious.

Check out the investors' calendar for a summary of the top economic events and earnings reports on tap this week.
 
March 19: ECB rate decision and expected earnings from Alibaba (BABA), Accenture (ACN), Darden Restaurants (DRI), and FedEx (FDX).
March 20: No major data or earnings expected.
March 23: January construction spending.
March 24: Expected earnings from GameStop (GME) and KB Home (KBH).
March 25: February durable goods orders and expected earnings from Cintas (CTAS), Paychex (PAYX), and Chewy (CHWY).