US Markets Watch: Inflation Data, Tariff Plans, and Fed Updates — What Investors Need to Know

Markets experienced some movement last week as President Trump's proposed tariffs influenced investor decisions. The S&P 500 gained 0.5%, the Dow Jones Industrial increased over 1%, and the Nasdaq Composite rose nearly 0.2%.

This week, investors will focus on the Federal Reserve’s preferred inflation measure — the Personal Consumption Expenditures (PCE) report. Other key updates include data on manufacturing, services activity, consumer confidence, and the final reading of fourth-quarter GDP. Corporate earnings reports from companies like Dollar Tree, Lululemon, and KB Home will also offer insights into consumer spending and economic trends.

Inflation and the Federal Reserve’s Plans

The Federal Reserve chose to hold interest rates steady last week but signaled expectations of higher inflation in the near future. Chair Jerome Powell acknowledged that tariffs might temporarily increase inflation, but the long-term outlook remains uncertain. Core PCE inflation is expected to rise to 2.7% in February from January’s 2.6%, with monthly inflation likely holding steady at 0.3%.

The Fed’s stance on interest rates will depend heavily on whether inflation remains manageable. Current forecasts suggest two rate cuts before the end of 2025. However, unexpected changes in inflation could alter this outlook.

Tariffs and Market Impact

President Trump's upcoming tariff announcement on April 2 has led to cautious market behavior. While tariffs are generally introduced to protect domestic industries, they can also lead to higher costs for consumers and businesses. Companies like Nike and FedEx have already cautioned investors about the potential impact on profits.

Investors will be closely watching the details of the tariff plan. Sectors relying on international supply chains, such as technology and retail, could face the greatest challenges. Domestic producers may benefit, but changes in trade policies will continue to influence market behavior.

Key Earnings to Watch

Several major companies are scheduled to report earnings this week, providing a clearer view of how businesses are navigating inflation and trade concerns. Notable reports include:

• Dollar Tree (DLTR): A strong indicator of consumer behavior, particularly for lower-income households.

• Lululemon (LULU): Offering insights into discretionary spending and the resilience of premium brands.

• KB Home (KBH): Providing data on the housing market and the effects of higher mortgage rates.

These reports will help investors gauge the broader economic landscape.

Economic Reports to Monitor

This week’s economic calendar includes several significant updates:

• Monday: Chicago Fed National Activity Index, S&P Global Manufacturing PMI, and Services PMI.

• Tuesday: FHFA House Price Index, Consumer Confidence Index.

• Wednesday: Mortgage Applications Data, Durable Goods Orders.

• Thursday: Revised Fourth-Quarter GDP, Personal Consumption Data, and Initial Jobless Claims.

• Friday: PCE Inflation Report, University of Michigan Consumer Sentiment Index.

These releases will provide a deeper understanding of inflation trends, consumer confidence, and overall economic health.

Investment Tips for the Current Market

Investors may consider adopting a balanced approach during this period. Diversifying portfolios across sectors and focusing on companies with solid fundamentals can offer stability. While sectors like technology and consumer discretionary may face more pressure, defensive sectors like utilities and consumer staples tend to remain stable.

Long-term investors may want to maintain their positions without reacting to short-term volatility. Monitoring inflation data and Federal Reserve signals can provide better guidance for future decisions.

Staying informed, reviewing market updates, and consulting with financial advisors can help investors make well-informed choices as the economic landscape evolves.

Also Read: Goldman Sachs’ 3 Must-Know Tips to Protect Your Investments in Volatile Markets