Here is Schwab's early look at the markets for Monday, March 23.
The final full week of the quarter kicks off with attention squarely on events thousands of miles from Wall Street following another weekend of war headlines.
Stocks and Treasuries spent most of Friday pulling back as the drumbeat of war went on. The Pentagon's announcement that it will commit more troops spooked investors, as did a mid-afternoon alert from Reuters that Iraq had declared force majeure on oilfields operated by foreign entities.
Crude prices rose again Friday, approaching $100 per barrel for U.S. futures and climbing near $112 for Brent futures, which track global prices. The Brent price came in range of $120 at one point last week, and crude is likely to continue calling the shots on Wall Street in days ahead.
"We've seen a very, very strong inverse correlation develop on an intraday basis between oil prices and the S&P 500," said Liz Ann Sonders, chief investment strategist at the Schwab Center for Financial Research, or SCFR. "And I think that backdrop is not likely to change unless we find ourselves with some sort of resolution or end to this conflict."
The S&P 500 Index recorded its fourth straight losing week and dipped beneath its November closing low of 6,538. It's also now closed below its 200-day moving average of 6,621 two days in a row—a bearish sign technically that could suggest more selling pressure ahead.
Friday's close for the S&P 500 Index was the lowest since last September 8, just barely above 6,500. The index is down about 5% year-to-date.
Data and earnings are sparse this week, so war remains center stage along with concerns that rising inflation could spoil hopes for any rate cuts this year. Central banks around the world kept interest rates unchanged last week but shared warnings about the possible impact of energy-driven inflation. Investors began penciling in possible rate hikes later this year, including chances for a Federal Reserve hike, futures markets showed.
Construction spending today and Treasury auctions today and tomorrow dominate the calendar early this week, with little in the way of jobs or inflation numbers on the schedule until April. Friday brings the U.S. government's final estimate of fourth quarter gross domestic product, or GDP, a report likely to draw attention after a reduction in the second estimate to 0.7% from 1.4%. This reflected lower-than-expected consumer spending.
Another item to watch this week is March Purchasing Manager’s Index data on the way over the next few days for various countries, with U.S. data scheduled tomorrow morning. Though the headline readings are important, input and output prices might have a bigger influence since they provide a sense of how much more costly goods have become recently.
The Fed last week projected just one rate cut in its quarterly "dot plot" the rest of the year and raised its core inflation projection for 2026.
Odds of a Fed rate cut this year fell from 95% a month ago to 6% by late Friday, according to the CME FedWatch Tool. Futures trading also works in a 30% chance of a rate hike at some point in 2026. The highest odds now, per the futures market, are for rates to stay right where they are now in a range between 3.5% and 3.75% all year, with 63% chances of that.
Treasury yields rose last week and are up sharply since the war began, in contrast to historic drops in yields when geopolitical volatility surges. The typical "flight to safety" that often lifts Treasuries and lowers yields hasn't occurred, in part because inflation was already a concern even before the war began. The 10-year Treasury note yield—which has now climbed about 43 basis points from its late-February lows—approached the 4.4% level Friday. This week, Congress will continue to debate the Trump administration's request for an extra $200 billion to fund the war. Higher spending typically raises the U.S. deficit and hurts Treasuries, which move opposite of their yields.
Several Treasury note auctions loom the next few days following relatively soft auction demand earlier this month. More of the same could drive yields even higher, suggesting investors want more payment for putting their money at risk. A 2-year note auction tomorrow is likely the critical one to watch as short-term yields soared last week amid falling rate cut chances.
"If inflation is expected to rise, if you're a fixed-income investor, you want to see higher yields to combat that inflation risk because you're locking in a fixed rate when you invest in a bond," said Collin Martin, head of fixed income research and strategy at SCFR. "So, you want to make sure you're being compensated accordingly. It looks like so far, inflation and inflation expectations are that key driver. That probably caught some investors off guard."
Earnings this week are about as quiet as any week in a quarter can get. Highlights include GameStop and KB Home later today, along with Chewy on Wednesday.
Major Wall Street indexes all fell sharply on Friday to end Wall Street's worst week so far this year. The Russell 2000 had the worst day Friday, dropping more than 2.5% as Treasury yields surged. The small cap benchmark technically became the first major U.S. index to fall into correction territory—defined as a drop of more than 10% but less than 20% from its closing high. Higher yields often hurt smaller companies more, as they tend to depend more on borrowing.
Technically, the S&P 500 Index and Nasdaq Composite both lost muscle last week, falling under their respective 200-day moving averages for the first time since last May. The S&P 500 Index would have to climb above 6,621 to move back above the moving average, which might be watched closely this week.
The Relative Strength Index, or RSI, for the S&P 500 Index dipped below 30 at one point Friday, historically an indication of oversold conditions and down from highs late last year above 70. This, along with recent poor investor sentiment readings, could be a contrarian indicator signaling possible improvement in coming days. However, market behavior during geopolitical storms can be unpredictable.
"I’m not sure that we’ve hit a capitulatory 'flush' in stocks yet," Peterson said. "The set-up for next week appears like it could deliver a bit of a binary performance—stocks continue to drop on Iran concerns or stocks initiate a strong technical bounce due to the near-term oversold status."
Meanwhile, the CBOE Volatility Index®, or VIX, spiked more than 21% to 29 at its intraday high Friday as investors seemingly dialed back their expectations for a quick resolution to the conflict in the Middle East, fueling demand for downside protection.
Every sector besides financials and energy fell Friday. Financials entered the week down more than any other sector year-to-date, and may have gotten some support from rising yields, which can improve bank profits. It also may be helpful that Goldman Sachs said in a letter to shareholders Friday it still expects strategic activity "to accelerate."
In individual trading Friday, FedEx initially soared as much as 7% after the delivery firm easily surpassed Wall Street's quarterly estimates and delivered better-than-expected guidance. The company's CEO said global demand is holding amid the war, Reuters reported. Shares finished flat, brought down by general malaise in the market.
Super Micro Computer tumbled 33% after the U.S. government charged a co-founder of the company and two others with being involved in a plan to divert U.S.-assembled servers to China, violating export control laws, Barron's reported. One of those charged was the company's senior vice president of business development, also a co-founder and board member.
Dell, which competes in the AI server market with Super Micro Computer, rose 0.6%
Arm Holdings climbed almost 2% following an upgrade to buy from reduce by HSBC. The analyst argues that Arm's transition from being a smartphone dependent semi-IP play to a "major" AI server and CPU beneficiary is "still being undervalued by the market."
Planet Labs surged 25% on strong earnings and guidance.
Generally, the best performers Friday other than banks included telecom firms and staples companies often seen as less volatile amid market turbulence. Stocks like AT&T, Verizon, Wendy's, and Dollar General gained. Tech and materials sectors, more exposed to the world economy, performed poorly.
The utilities sector—often strong at times of volatility—had the weakest day of all, falling 4%. That's mainly because it includes power firms that fell sharply Friday amid concerns of rising energy prices.
The Dow Jones Industrial Average® ($DJI) dropped 443.96 points Friday (-0.96%) to 45,577.47; the S&P 500 Index (SPX) lost 100.01 points (1.51%) to 6,506.48, and the Nasdaq Composite® ($COMP) descended 443.08 points (-2.01%) to 21,647.61.
For the week, the $DJI dropped 2.11%, the S&P 500 lost 1.9%, and the Nasdaq dipped 1.25%.