A Fed meeting and retail sales data greet a flailing stock market: What to know this week
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The stock market has sunk near a six-month low as concerns over slowing economic growth and fear of how tariffs could impact the outlook have shaken investor confidence.
Last week, the S&P 500 (^GSPC) fell nearly 2.3% while the Dow Jones dropped 3%, or more than 1,300 points. The tech-heavy Nasdaq Composite (^IXIC) fell about 2.4%. On Thursday, the S&P 500 officially entered a correction as the benchmark index fell 10% from its record high on Feb. 19.
In the week ahead, the Federal Reserve and the health of the US economy will remain top of mind for investors. The central bank is largely expected to hold interest rates steady when it announces its next monetary policy decision on Wednesday. Markets will focus on any clues about when the central bank could cut rates again.
Monday's release of February retail sales is set to highlight the weekly slate of scheduled economic data releases. On the corporate front, quarterly results from Nike (NKE), FedEx (FDX), and Micron (MU) after the bell on Thursday will be closely tracked.
The recent sell-off in stocks has coincided with growing market fears about slowing economic data, pushing investors to price in roughly three interest rate cuts from the Fed in 2025.
But with inflation still well above the Fed's 2% target and possible impacts from the Trump administration's tariffs and other policies potentially boosting price increases further, the Fed is widely expected to leave interest rates unchanged on Wednesday.
Key to watch will be the Fed's latest Summary of Economic Projections (SEP). That includes its "dot plot," which maps out policymakers' expectations for where interest rates could be headed in the future, as well as commentary from Fed Chair Jerome Powell during his press conference.
When the Fed last issued its dot plot in December, the median forecast was for the fed funds rate to end 2025 in a range of 3.75% to 4%, which would reflect two 25 basis cuts this year, one less than market expectations.
Morgan Stanley chief US economist Michael Gapen said that with fiscal policy uncertainty continuing to weigh on the outlook, he expected that the Fed "communicates a heavy dose of patience."
"Chair Powell is likely to sound cautiously optimistic on the economy, but point to a cloudy outlook since policy uncertainty is high," Gapen wrote.
The worst retail sales report in a year was one of the first data points that kicked off the market's rerating of the US economy's growth outlook over the past month.
On Monday morning, investors will get another look at whether January's 0.9% decline in retail sales was the start of a slowdown in consumer spending. Economists expect a rebound in February's numbers, with consensus projecting retail sales to rise 0.6%.
"The belt tightening in January followed a relatively impressive holiday season in November and December, which had sales revised even higher," Wells Fargo's team of economists led by Jay Bryson wrote in a note to clients on Friday. "The pullback in January, then, might say more about the strong end to the 2024 holiday shopping season, rather than a bend in consumer spending."
Given the recent drawdown in stocks amid growth fears, strategists have noted that any signs of better economic growth could be a catalyst for markets. And on the flip side, any further souring could pressure stocks more.
"The key market risk going forward is a major further deterioration in the economic outlook," Goldman Sachs chief US equity strategist David Kostin wrote in a note to clients that included a cut of their year-end S&P 500 target to 6,200 from 6,500.
The past month's dramatic market rout was headlined by significant selling in the so-called "Magnificent Seven" tech stocks.
Nvidia (NVDA), Alphabet (GOOG, GOOGL), Amazon (AMZN), Meta (META), Apple (AAPL), and Microsoft (MSFT) are all off about 20% from their recent 52-week highs. Meanwhile, Tesla (TSLA) is down nearly 50% from its high over the past year.
Still, the combination of stocks makes up about 30% of the S&P 500's market cap, not far off their mid-30% peak weighting seen in 2024. And as recent market action has shown, their direction remains critical to where the market heads next.
"For the market to go higher from here, you need the broadening thesis to happen, but you need your Mag Seven to contribute," Citi US equity strategist Scott Chronert told Yahoo Finance.
Chronert added that the "structural growth component" remains intact for the cohort that's led the S&P 500's earnings gains over the past several years. BMO Capital Markets chief investment strategist Brian Belski echoed Chronert's sentiment about the group's importance.
"Maybe these tech stocks got ahead of their skis a little bit," Belski told Yahoo Finance. "But at the end of the day, these are monster companies that define the growth trajectory for the United States stock market. They are not going away."
Economic data: Retail sales month over month, February (+0.6% expected, -0.9% prior); retail sales excluding auto and gas month over month, February (+0.5% expected, -0.5% prior); retail sales control group month over month, February (+0.4% expected, -0.8% prior); NAHB Housing Market Index, March (42 expected, 42 prior)
Earnings: No notable earnings releases expected.
Economic data: Housing starts month over month, February (+0.8% expected, -9.8% prior); building permits month over month, February (-1.6% expected, -0.6% prior); import price index month over month, February (-0.1% expected, +0.3% prior)
Earnings: XPeng (XPEV)
Economic data: FOMC interest rate decision (unchanged)
Earnings: Five Below (FIVE), General Mills (GIS), Signet Jewelers (SIG), Williams-Sonoma (WSM)
Economic data: Initial jobless claims, week ending March 15 (224,00 expected, 220,000 prior); Philadelphia Business Outlook, March (10.3 expected, 18.1 prior); leading index, February (-0.2% expected, -0.3% prior), existing home sales, February (-3.4% expected, -4.9% prior)
Earnings: Academy Sports and Outdoors (ASO), Darden Restaurants (DRI), FedEx (FDX), Land's End (LE), Lennar (LEN), Micron (MU), Nike (NKE)
Friday
Economic data: No notable economic data releases.
Earnings: Carnival Corporation (CCL), NIO (NIO)
Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
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