Weekly Market Recap: Markets Find Support as Fed Signals Caution and Economic Data Comes into Focus
Market Overview
Markets navigated a week of mixed signals, ultimately posting modest gains across most major indices. The S&P 500 rose 0.53%, buoyed midweek by dovish remarks from the Fed. The Dow Jones Industrial Average led U.S. benchmarks with a 1.21% gain, while the NASDAQ lagged with a 0.18% uptick. Value stocks outperformed growth, and small caps bested their large-cap counterparts, extending recent trends.
Internationally, foreign equities gained 0.79%, while emerging markets surged 1.16%. European stocks inched higher despite renewed trade tensions and geopolitical risks. Asian markets finished broadly positive, led by semiconductor enthusiasm in South Korea and Taiwan, although profit-taking in Chinese tech cooled momentum.
Sector-wise, Energy (+8.2% YTD), Health Care (+6.6%), and Utilities (+4.1%) are the top YTD performers, while Consumer Discretionary (–13.7%), Information Technology (–9.4%), and Communication Services (–3.3%) continue to drag.
In fixed income, bond markets rallied as Treasury yields declined following the Fed’s decision to slow the pace of quantitative tightening (QT). The 10-year Treasury yield fell to 4.25%, while the Bloomberg U.S. Aggregate Bond Index posted a weekly gain.
Federal Reserve Insights & Economic Roundup
As expected, the Fed left interest rates unchanged at 4.50%, but markets found relief in dovish signals from Chair Powell. Notably, the Fed will reduce the pace of QT, lowering the Treasury runoff cap from $25 billion to $5 billion monthly—although Governor Waller dissented. This pivot is seen as temporary amid ongoing debt ceiling negotiations but provided near-term support for bond markets.
Economic forecasts turned more downbeat: GDP growth expectations for 2025 were revised down to 1.7% (from 2.1%), and core inflation was revised up to 2.8% (from 2.5%). The Fed appears increasingly cautious, juggling inflation risks with signs of economic slowdown.
The Conference Board's Leading Economic Index (LEI) continues to highlight softening conditions, driven by weak consumer expectations and persistent declines in new orders. Meanwhile, core capital goods orders remain stable, offering some reassurance amid broader stagflation fears. Importantly, LEI’s six-month change, while still negative, remained on its upward trend and does not signal a recession is imminent.
U.S. industrial production rose by 0.7% in February, ahead of expectations for a 0.3% increase.3 This was its highest level on record as businesses likely pulled forward purchases of inputs to get ahead of tariffs.
On the commodities front, WTI crude oil posted gains, supported by new U.S. sanctions targeting Iran-related exports. Gold hit record highs above $3,000/oz, fueled by Fed caution, geopolitical tension, and haven flows. The U.S. dollar firmed modestly on better-than-expected jobless claims and a restrained global central bank environment.
The Week Ahead
A full slate of economic data may provide more clarity on inflation, growth, and the consumer:
Monday: Chicago Fed National Activity Index, March Flash PMIs
Tuesday: FHFA and S&P/Case-Shiller Home Prices, Consumer Confidence, New Home Sales
Wednesday: Durable Goods Orders, Capital Goods Shipments
Thursday: Q4 GDP (Final), Initial Jobless Claims, Core PCE (Q4), Advance Trade Balance
Friday: February PCE Price Index, Personal Income/Spending, University of Michigan Sentiment
Markets will be closely watching the Friday PCE inflation print, which may influence expectations for a June rate cut, increasingly viewed as the Fed’s likely next move.