March 18th Market Overview

Happy Wednesday

Everything hit at once today. Wholesale inflation came in more than double the estimate and that's before a single war-driven energy cost touches the data. Then Israel struck Iran's largest gas field last night and Powell stepped to the mic to confirm rate cuts aren't coming anytime soon.

The Dow broke its 200-day moving average for the first time since June. I've been saying the market was under-reacting to this inflation story. Today it started catching up.

Let’s dig in...

Today's Big Picture

Rate Cuts Are On Ice

The Fed held rates at 3.5 to 3.75 for the second straight meeting, 11-1. Powell said inflation isn't moving as fast as they expected. The dot plot still pencils in one cut this year, but he was explicit: no inflation progress, no cut. I wouldn't be pricing one in.

The Oil Shock Is Getting Worse

Israel struck South Pars, the world's largest natural gas field, which Iran shares with Qatar. Brent crude hit $109 on the news. Iran is now threatening energy infrastructure in Saudi Arabia, the UAE, and Qatar. Vessel traffic through the Strait of Hormuz is still under one-tenth of normal. The market is pricing this like it resolves soon. I'm not convinced.

Inflation Was Already Off the Rails

February's producer price index came in at 0.7, more than double the 0.3 estimate. The 12-month rate hit 3.4, the highest in a year. Todd Schoenberger at CrossCheck called it structural, not temporary. And this data doesn't include a single day of war-driven energy costs yet.

Market Overview

Index Performance

Stock Spotlight

Nvidia $NVDA ( ▼ 0.8% )  
avoided the broad selloff, finishing positive while every other Magnificent Seven stock closed in the red. The company got Chinese government approval to sell its H200 chips there and is reportedly preparing a China version of its Groq AI chip.

Microsoft $MSFT ( ▼ 1.81% )  
is weighing legal action against Amazon and OpenAI over their reported $50 billion cloud deal. The dispute is whether AWS can offer OpenAI's Frontier models without violating Microsoft's exclusive rights to OpenAI API access through Azure. Microsoft's entire AI infrastructure play runs through that exclusivity.

Micron $MU ( ▲ 1.34% )  
hit all-time highs during the session, then blew the doors off after the bell. Revenue came in at $23.86 billion against an $18.70 billion estimate. EPS hit $12.20 against $8.73 expected. The guidance was the real story $33.5 billion next quarter, 81 gross margin, and $19.15 in adjusted EPS against a $10.77 Wall Street estimate. The company also entered high-volume HBM4 production this week with its entire 2026 HBM supply already locked in through customer agreements.

Big Name Updates

Lululemon $LULU ( ▲ 4.71% )  
beat fourth-quarter estimates but guided below expectations for the full year. Sales guidance of $11.35B to $11.50B missed the $11.52B Wall Street wanted, and they're pushing more products at a discount to move inventory.

Macy's $M ( ▲ 4.23% )  
posted a solid earnings beat, earning $1.67 per share on $7.64B in revenue against estimates of $1.53 per share. The strength came entirely from Bloomingdale's.

Block $XYZ ( ▼ 3.2% )  
got upgraded to Buy with a price target raised to $77 from $72. The analyst cited Cash App upside, better margin expansion, and the stock trading at just 12x 2027 earnings after a significant workforce reduction.

SoFi $SOFI ( ▼ 0.43% )  
fired back at Muddy Waters, calling their short report "factually inaccurate and misleading" and flagging potential legal action.

Other Notable Company News

Alibaba $BABA ( ▼ 1.38% )  
is raising prices on select AI cloud and storage products by as much as 34 points. They have pricing power right now and are monetizing the demand.

Coherent $COHR ( ▲ 4.29% )  
is showing its InP laser and modulator portfolio at OFC 2026, targeting 1.6T and 3.2T optical systems for AI data centers, with 6-inch InP production expanding.

Cohu $COHU ( ▲ 6.58% )  
received a Stifel price target raise to $34 from $32 after a leading U.S. semiconductor foundry placed orders for its Eclipse platforms for AI processor testing. Management now guides toward the high end of its $65M to $80M high-performance computing revenue target for 2026.

AMD $AMD locked in a supply deal with Samsung for next-generation HBM4 memory chips.

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Sector Watch

Bond Market

Treasury yields climbed after the wholesale inflation report and held higher through Powell's press conference. The 10-year note settled around 4.26, up from 4.23 going in. The 2-year settled near 3.75. Traders now give roughly 4-in-10 odds the Fed stays on hold all of 2026, up from about 3-in-10 yesterday. Watch the 10-year. It drives mortgage rates and longer-term borrowing costs, and it's moving the wrong direction.

Policy Watch

The Fed

• Rates held at 3.5 to 3.75, 11-1 vote. Stephen Miran dissented for a cut.

• Powell said the Fed is balancing downside labor risks against upside inflation risks and called it "a difficult situation." That's not encouraging language.

• Inflation forecast revised to 2.7 PCE for 2026, up from 2.4 in December. The dot plot still shows one cut, but it's conditional.

• Powell said he won't leave the board while the DOJ investigation into the Fed's building project is unresolved, and will stay until Kevin Warsh is confirmed as his successor.

• April 28-29 is his final meeting as chair.

Trade

Trump issued a 60-day Jones Act waiver, letting oil, natural gas, fertilizer, and coal move freely between U.S. ports. A useful pressure valve while the Middle East conflict drags on, not a real fix.

International

South Korea cracked down on "double listings," a practice long blamed for diluting shareholders and driving the Korea discount. The KOSPI rallied hard on the news. Long overdue.

What to Watch

Micron Earnings

Micron's beat was so large it reframes the AI infrastructure trade. With 81 gross margins guided next quarter and HBM4 already in production, watch how AMD $AMD, Nvidia $NVDA, and the broader semis react at open tomorrow. If the market can't rally on numbers like these given today's macro backdrop, that tells you something about where sentiment really is.

Strait Of Hormuz

Vessel traffic is still under 10 of normal capacity. Iran is threatening retaliatory strikes on Saudi and UAE energy infrastructure after the South Pars attack. Every move here shows up directly in oil prices and inflation data. This is the most important variable in the market right now.

April 28-29 FOMC

Powell's last meeting as chair. By then we'll have two more months of inflation data, including the first prints that actually capture war-driven energy costs. If those numbers stay hot, the "one cut in 2026" projection gets a lot harder to defend.

Thanks for reading - you are now the more informed 🙂

- John

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