Here is Schwab's early look at the markets for Tuesday, March 24.
War's relentless drumbeat paused and Wall Street mounted a slight comeback to start the new week. There's little in the way of keystone earnings or data to shift attention away from the intense focus on geopolitics, so crude oil prices could keep setting the pace for stocks, the dollar, and Treasuries.
President Trump posted yesterday that the U.S. and Iran are having "very good and productive conversations." He postponed threatened strikes against the country's power plants by five days and added the U.S. is "getting very close to meeting our objectives" and is "very intent on making a deal with Iran."
Any deal would likely have to quickly involve reopening the Strait of Hormuz, or the rally could be threatened. As of late Monday, the Strait remained closed, and investors will monitor any signs of ships going through after Trump's statements. There's some skepticism how much progress, if any, has occurred, and Iran denied that talks took place. It's also unclear if the U.S. is done heightening military activity after the administration said late last week it's sending more troops to the region. Another open question is where Israel stands on Trump's negotiations.
Crude continues driving the market, closely correlated to major indexes. Yesterday's 10% retreat in U.S. crude prices to under $88 per barrel by late in the session helped the S&P 500 Index and Nasdaq Composite recover a little over half of the sharp losses they racked up last Friday. Still, neither made it back to their respective 200-day moving averages, perhaps a sign that investors want more details before going full-in on optimism.
Bond yields fell Monday on signs hopes of the Middle East conflict deescalating, though the 10-year note yield stayed above 4.3%--roughly this year's high mark until last week. Shorter-term yields more closely connected to current Federal Reserve policy expectations barely fell or even rose Monday.
"We believe it’s too early to signal an all-clear, but instead this raises the possibility that volatility will remain elevated going forward," said Cooper Howard, director of fixed income research and strategy at the Schwab Center for Financial Research. "The longer oil prices stay elevated, the more likely there will be an inflation hit and longer-term bond yields will stay high."
Howard added, "We believe the Fed will continue to remain on hold for the time being given the potential for higher inflation."
Data and earnings are sparse this week, so war remains front and center along with concerns that rising inflation could spoil hopes for any rate cuts this year. The yield curve has narrowed recently as investors wiped out almost any hope of a rate cut by the Fed and started calculating odds of rate hikes amid potential oil-driven inflation.
As of late Monday, odds of a rate cut before the end of the year dwindled to around 17%, according to the CME FedWatch Tool, while odds of at least one hike were 8%. The futures market now prices in the highest chance—nearly 75%--of rates remaining right where they are between 3.5% and 3.75% the rest of 2026.
The rally to record highs in the S&P 500 Index earlier this year centered partly on hopes for easier policy by the Fed and stable policy by other central banks. That’s reversed, with rate hikes now seen possible both here and abroad. The inflation fear is starker in Europe and Asia, which depend more on crude oil and other commodities sourced from the Middle East.
Back when U.S. stocks were carving new highs, "dip buyers" regularly stepped in on intraday pullbacks to snap up shares. This was predicated in part on solid hopes for at least one 2026 rate cut by the Fed, which reached 95% at one point in the futures market a month ago. That's no longer a given, so despite the sharp rally Monday on war hopes, investors can't necessarily expect markets to suddenly resume acting the way they did earlier this year, even if the war ends.
In data Monday, January construction spending fell 0.3% monthly in February but rose 1% year over year. Residential construction fell 0.8% from December, and private construction declined amid what appeared to be the impact of rising rates and labor constraints, Briefing.com noted.
Treasury auctions continue today with 2-year notes up for bid later this morning. Results should be available before the close. Auctions earlier this month saw lax demand, a negative sign for markets suggesting investors demand higher yields to risk their money in U.S. assets. However, the U.S. dollar did spike this month, a sign that some "safe haven" buying apparently persists.
Investors now face a gap in key jobs and inflation numbers until next week. The key report comes a week from Friday when the Bureau of Labor Statistics issues its March nonfarm payrolls report. However, the market is closed that day for Good Friday, meaning there won't be a chance for equity participants to trade on the data until futures trading begins the following Sunday evening.
In data today, stay alert for the March Purchasing Manager’s Index data due later this morning. U.S readings are expected to come in above 50 for manufacturing, putting them in positive territory. Though the headline data is important, input and output prices might have a bigger influence since they provide a sense of how much more costly goods have become recently. U.S. ISM manufacturing and services data are due next week.
Earnings are light this week but include KB Home later today and Chewy tomorrow.
Major Wall Street indexes enjoyed a relief rally Monday, the first higher daily close for the S&P 500 Index since last Tuesday. It's still down four weeks in a row and off roughly 4% this month. The market finished Monday well below its early highs, possibly suggesting skepticism about Trump's posts and concern that Iran hadn't confirmed talks taking place. Details also remain hazy, and the Strait was still shut.
At its intraday high Monday, the S&P 500 climbed above the 200-day moving average of 6,624, but couldn't maintain that over the course of the session. The Nasdaq didn't come as close to its 200-day moving average of 22,261 at any time on Monday. Sustained closes above these levels would likely be needed to reassure technical traders.
The Relative Strength Index, or RSI, for the S&P 500 Index clawed back to almost 39 by late Monday after falling below 30 at one point Friday, historically an indication of oversold conditions and down from highs late last year above 70. RSI is a momentum indicator.
Meanwhile, the CBOE Volatility Index, or VIX, stayed elevated above 25 late Monday, down only about 4% from Friday. This mild move sends a message that participants remain cautious and hedging activity remains relatively strong despite Monday's positive Middle East news. Typically, any reading of 20 or higher suggests choppiness ahead.
All 11 S&P 500 sectors were on the mend and in the green to start the week, led by cyclical ones like discretionary, tech, financials, and industrials that tend to rally when the economy flexes its muscle. Defensive areas like staples and health care brought up the rear. Energy—the only sector up month-to-date—was third-to-last at times late Monday but enjoyed a solid rally over the last half hour to climb more than 1% for the day.
In individual trading Monday, airline and cruise line stocks surged after news the U.S. is postponing strikes on Iran's power plants. Delta Air Lines rose 3% and Carnival climbed 5%.
Mining stocks Freeport McMoRan and Newmont revived from early losses Monday to close up 5% and 3%, respectively. Gold and silver sagged but copper popped 2%.
Energy stocks including Exxon Mobil and Chevron inched up despite lower oil prices. Any improvement in Middle East conditions might arguably help the oil industry by easing concerns about recession.
Home builder stocks rose sharply as Treasury yields fell, raising hopes that mortgage rates might ease. The falling 10-year yield also might have helped small-cap stocks, which outpaced their larger brethren Monday.
Automobile stocks including General Motors, Rivian, and Tesla all rose 3% or more Monday on hopes economic activity might pick up. Other sub-sectors seeing relief rallies included consumer discretionary and info tech.
However, fertilizer stocks fell on ideas that elevated prices might come down. Fertilizer prices—natural gas is a key part of the manufacturing process—are up 24% since the conflict began, a concern as U.S. farmers begin planting. Next week features U.S. government prospective plantings data for crops like corn, soy, and wheat.
MongoDB climbed 5% following an upgrade from neutral to outperform by Mizuho, which said it sees a "compelling" share setup after the company's recent earnings report.
Estee Lauder fell 7% after the Financial Times reported it's nearing a $40 billion merger with Puig.
The Dow Jones Industrial Average® ($DJI) climbed 631.00 points Monday (+1.38%) to 46,208.47; the S&P 500 Index (SPX) added 74.52 points (+1.15%) to 6,581.00, and the Nasdaq Composite® ($COMP) climbed 299.15 points (+1.38%) to 21,946.76.