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Equities declined for a third consecutive week. For the week, the S&P 500 Index was -1.6%, the Dow Jones Industrials -1.9%, and the NASDAQ -1.0%. The Energy, Utilities, and Consumer Staples sectors led the S&P 500 Index for the week, while the Financials, Industrials, and Consumer Discretionary sectors lagged. The 10-year U.S. Treasury note yield was 4.284% at Friday’s close versus 4.146% the previous week.
The on-going conflict with Iran has pushed energy prices higher across the world. In the U.S., the average price of regular unleaded gasoline is $3.675/gallon. This 7.7% higher than a week ago and 25.4% higher than a month ago. Diesel fuel is higher at $4.942/gallon, +9.6% from a week ago and +35.0% from a month ago.
The concern about energy-induced inflation has pushed out investor expectations for a Federal Reserve interest rate cut. At the Federal Open Market Committee (FOMC) policy meeting this week, the FOMC is widely expected to keep short-term interest rates in the 3.50% to 3.75% range. There will also be an update to the Fed’s Summary of Economic Projections including what the FOMC views at an appropriate interest rate policy path for the remainder of 2026. The projection from the December meeting showed a single 0.25% interest rate reduction for 2026, and that is reflected in the CME Fed funds futures for October.
This week ten companies in the S&P 500 Index are scheduled to report quarterly earnings. First quarter earnings are expected to grow by 11.6% and quarterly revenue growth is expected at 9.4%. Full-year 2026 earnings are expected to grow by 15.3% with revenue growth of 8.0%.
In our Dissecting Headlines section, we look at actions intended to lower energy prices.
Financial Market Update
Dissecting Headlines: Oil Reserve Releases
The conflict in Iran has severely curtailed the flow of oil coming from the Persian Gulf, which accounts for 20% of the world’s oil production. The International Energy Agency (IEA), an intergovernmental organization representing 32 member countries to include the United States, Japan, Germany, South Korea and most European nations, confirmed plans for a coordinated 400 million barrel release from government and industry strategic reserves. The 400 million barrels would help bridge the supply disruption from the Persian Gulf for about two to three months. IEA member countries hold over 1.2 billion barrels of petroleum reserves.
As part of the IEA release, the U.S. plans to release 172 million barrels from its Strategic Petroleum Reserve over the next 120 days. The Trump administration indicated it plans to replenish the reserve with about 200 million barrels within the next year, exceeding the amount withdrawn. The U.S. Strategic Petroleum Reserve currently holds about 415 million barrels of oil.
In addition to the release of reserves, the U.S., European Union, and other interested nations are in discussions to protect shipping through the Persian Gulf. The E.U. currently secures shipping in the Red Sea to make sure commercial shipping can move through the Suez Canal.
As the conflict enters its third week, the markets likely remain volatile in the near-term.
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