Stocks Slide as Rising Energy Prices and Fed Hawkishness Renew Stagflation Fears

Stocks fell sharply last week, with each of the major benchmark indexes posting declines as rising energy prices, tensions in the Middle East and renewed stagflation fears dampened risk sentiment. The S&P 500 fell to a four-month low, while underperforming tech stocks impacted the NASDAQ. A higher-than-expected Producer Price Index and hawkish comments from the Federal Reserve pushed the yield on 10-year Treasuries to its highest level since July 2025, which also weighed on long-duration tech and growth stocks. Of the 11 market sectors, only energy closed higher. Among the most underperforming were Materials, Utilities and Consumer Staples. Gold prices continued to recede, falling to a two-month low, affected by rising inflation concerns and expectations of higher-for-longer interest rates.

Federal Reserve Maintains Current Target Range Amid Heightened Global Risks

Following its meeting last Wednesday, the Federal Open Market Committee (FOMC) voted to maintain the federal funds target rate range at its current 3.50%-3.75%. In arriving at this decision, the FOMC noted that while economic activity has been expanding at a solid pace, job gains have remained low and inflation continues to be elevated. Uncertainty about the economic outlook also remained heightened, particularly with the developments in the Middle East. The FOMC remained strongly committed to supporting maximum employment and returning inflation to its 2.0% objective. Moving forward, the FOMC indicated that adjustments to the target range for the federal funds rate will be based on an assessment of incoming data, the evolving economic outlook and the balance of risks.

Eye on the Week Ahead

This week provides important economic reports covering several economic sectors. Data on housing, manufacturing and international trade and prices will be released this week.