Opening: US stocks open lower on Wednesday, market focuses on inflation data and Fed decision

On the evening of March 18 Beijing time, U.S. stocks opened lower on Wednesday. While oil prices surged, the Producer Price Index (PPI) readings came in higher than expected, indicating that U.S. inflation is still fermenting. Traders are awaiting the Federal Reserve’s interest rate decision.

The Dow Jones Industrial Average fell 79.33 points, or 0.17%, to 46,913.93; the Nasdaq dropped 61…795 points, or 0.28%, to 22,417.733; the S&P 500 declined 18…93 points, or 0.28%, to 6,697.16.

U.S. wholesale prices surged significantly in February, further indicating that inflation remains persistent beyond energy price increases.

The U.S. Bureau of Labor Statistics reported on Wednesday that the Producer Price Index, which measures the costs producers face to bring their products to market, rose 0.7% this month after seasonal adjustment. Excluding volatile food and energy costs, core PPI increased 0.5%. Excluding food, energy, and trade services, PPI rose 0.5%.

Economists surveyed by Dow Jones had previously expected both indicators to grow by 0.3%.

The report shows that inflation was already at a precarious level before the outbreak of the Iran war—an event that has heightened concerns about stagflation amid rising oil prices.

Todd M. Schuenberg, Chief Investment Officer at CrossCheck Management LLC, said, “The higher-than-expected February PPI figures are related to tariffs.”

He pointed out that prices for metals, industrial inputs, and manufacturing costs have all increased, describing this as structural inflation rather than temporary, and it could continue to significantly impact monetary policy into the third quarter.

Schuenberg continued, “Additionally, since the start of the Iran conflict, we’ve seen hot energy prices (not yet reflected in these reports), and Wall Street is preparing for rapid price increases that will clearly pass through to consumers.”

On Wednesday, U.S. crude oil futures continued to rise, with West Texas Intermediate (WTI) up over 1% to $97 per barrel. International benchmark Brent crude rose over 5%, surpassing $108 per barrel.

The previous day, major stock indexes barely escaped the impact of rising oil prices. The Dow, S&P 500, and Nasdaq all closed higher on Tuesday. Meanwhile, oil prices rose after former U.S. President Donald Trump posted on Truth Social that the U.S. does not need NATO allies’ help in the Middle East.

Before making this statement, Trump hinted on Monday that he might form a coalition to help protect ships passing through the Strait of Hormuz, although some countries are “not very enthusiastic” about it.

A series of attacks by Iran on energy infrastructure in the United Arab Emirates also raised concerns about oil and fuel transportation.

Investors are now looking ahead to the Federal Reserve’s expected interest rate decision on Wednesday.

Markets anticipate the central bank will keep rates unchanged in the 3.5% to 3.75% range. Traders will focus on any guidance from Fed Chair Jerome Powell regarding whether rising oil prices will influence future monetary policy.

Anthony Saglimbene, Chief Market Strategist at Ameriprise Financial, said, “Before the [Wednesday] Fed decision and high oil prices, market trading remains somewhat hesitant. While the Fed may hold rates steady on [Wednesday], investors will be watching how policymakers interpret the Iran conflict amid inflation risks and potential impacts on growth prospects.”

Saglimbene also believes that a healthy earnings environment continues to support U.S. stocks, noting that in the context of escalating geopolitical uncertainty related to Iran and concerns over AI disruption, investors may be paying close attention this week.

Jef Buchtel, Chief Stock Strategist at LPL Financial, similarly believes that a solid economy, “more reasonable” valuations, and strong corporate fundamentals continue to underpin investor sentiment.

In terms of earnings reports, attention is on Micron Technology, which is scheduled to release its latest quarterly results after the market closes on Wednesday. The stock has soared this year, driven by surging demand for high-bandwidth memory, with shares up nearly 62%.