U.S. equity markets navigated heightened uncertainty this week as investors reacted to inflation data and escalating tensions with Iran, spurring shifts in energy and defense stocks. The S&P 500 closed flat, while the VIX surged to 18.7, signaling increased market volatility.
- Core CPI rose to 3.4% YoY, above forecasted 3.1%
- S&P 500 closed at 5,218.33, flat for the week
- Crude oil (CL=F) reached $87.60 per barrel
- VIX climbed to 18.7, signaling elevated volatility
- Apple (AAPL) gained 1.8%, driven by strong Asia sales
- Defense stocks (LMT, RTX) rose 2.9% and 3.4% respectively
Equity traders turned cautious this week as inflation data out of the U.S. revealed a 3.4% year-over-year increase in the core CPI, exceeding expectations of 3.1%. The figure reignited speculation about a potential delay in Federal Reserve rate cuts, with markets pricing in a 62% probability of a hold at the upcoming March FOMC meeting. The benchmark S&P 500 fluctuated within a 0.5% range, ending the week nearly flat at 5,218.33, while the Nasdaq Composite edged up 0.4% to 16,892.11, supported by gains in technology stocks like Apple (AAPL), which rose 1.8% on stronger-than-expected iPhone sales in Asia. Meanwhile, crude oil prices spiked to $87.60 per barrel (CL=F) amid growing concerns over supply disruptions in the Middle East. Iran’s recent military drills near the Strait of Hormuz and the targeting of commercial vessels in the Red Sea have heightened fears of broader conflict. The surge in oil prices contributed to a 2.3% gain in the energy sector, with ExxonMobil (XOM) and Chevron (CVX) posting gains of 3.1% and 2.6%, respectively. Defense stocks also responded positively, as Lockheed Martin (LMT) climbed 2.9% and Raytheon Technologies (RTX) advanced 3.4% on expectations of increased defense spending amid regional instability. The VIX, a key measure of market fear, rose to 18.7 from 16.3 the prior week, reflecting investor anxiety over dual risks: economic policy uncertainty and geopolitical escalation. Sector rotation was evident, with utilities and consumer staples underperforming as bond yields climbed to 4.65% on inflation concerns. The broader market was also monitored for adherence to sell rules, with technical analysts noting that the S&P 500 breached its 200-day moving average briefly, sparking short-term caution among institutional traders.