Markets Retreat Again Amid Energy Shock and Mounting Inflation Concerns

Wall Street saw a third straight week of losses as rising oil prices sparked inflation fears. Each of the major benchmark indexes declined as investors moved away from risk. Last week, the market moved because of intensifying geopolitical conflict in the Middle East. The week began on a high note, with markets pushing past early losses to finish in the black. However, persistent concerns about crude oil supplies and surging prices, plus disappointing economic data, pulled stocks to their lowest levels this year. Crude oil prices remained well above $98.00 per barrel, up over 70% for the year. The majority of market sectors closed last week with losses, led by Financials and Consumer Discretionary. Energy, Consumer Staples and Utilities ended the week higher. Treasury yields rose, with the 10-year note reaching its highest level since January after gaining 15 basis points.

February CPI Shows Stable Trend Despite Gains in Shelter and Energy

Consumer prices stabilized somewhat in February, according to the latest information released by the Bureau of Labor Statistics. The Consumer Price Index rose 0.3% in February following a 0.2% increase in January. Over the 12 months ended in February, the CPI rose 2.4%, unchanged from the rate for the year ended in January. Shelter prices rose 0.2% in February and were the largest factor in the overall monthly increase. Food prices increased 0.4% last month, while energy prices rose 0.6%. Prices less food and energy increased 0.2% in February and 2.5% for the 12 months ended in February, the same increase as in the 12-month period ended in January.

Eye on the Week Ahead

The Federal Open Market Committee (FOMC) meets this week. The Committee will have quite a bit of information to parse through before determining whether to make any adjustments to interest rates. The conflict in Iran, rising crude oil and gas prices, waning employment and stubborn inflationary pressures should factor into any decision the FOMC makes.