Energy & Markets On Edge

RECAPPING LAST WEEK

U.S. equity indices fell after a hotter-than-expected wholesale inflation report while technology
stocks came under pressure following Nvidia’s earnings report. The Nasdaq Composite and
Russell 2000 indices lost around 1%, reversing gains made earlier in the week. The S&P500 slid
0.5%. Sector performance tilted positive but was offset by notable weakness in financials and
technology. Solid fourth-quarter results and a positive forecast from chipmaking giant Nvidia
failed to excite investors—shares 6.5%, dragging down other names in the sector. Software
companies continued to be negatively impacted by new tools released by artificial intelligence lab
Anthropic. Gold futures rose 3% while silver jumped more than 11% to $94.40. U.S. Treasury
yields continued their month-long slide, with the 10-year note falling below 4% for the first time in
three months. Fresh uncertainty over U.S. trade policy and ongoing unease about AI investment
pushed investors towards more defensive posturing last month, boosting bond prices and
lowering interest rates. Turning to economic data, Friday’s Producer Price Index release revealed
that inflation could pick up in the months ahead. PPI rose 0.5% MoM in January as margins for
services companies surged, suggesting businesses were passing on tariff costs to consumers.
Adding to inflation concerns was a report that rare earth metal shortages are pushing up prices
for U.S. aerospace and semiconductor firms. China’s control of the rare earth market is likely to be
an important topic during the upcoming meeting in Beijing between Presidents Trump and Xi. U.S.
consumer confidence edged higher in February to 91.2 from 89.0 as views of labor market
conditions improved slightly. On the international front, crude oil prices rose 1.5% last week amid
reports that OPEC+ will likely consider raising output in April, ending a three-month pause. In
Japan, the nomination of two advocates of economic stimulus to the central bank’s board sent
the yen lower while the Nikkei 225 stock index soared to another record high. The move,
combined with tame inflation report, may affect the Bank of Japan’s plans for raising interest
rates. Australia’s CPI rose more than expected in January to 3.4% YoY, increasing odds of another
rate hike this year. Germany’s consumer inflation eased to 2% last month as lower energy costs
and a strong euro versus the U.S. dollar kept price increases at bay. Finally, Canada’s economy
unexpectedly contracted in Q4 2025, with GDP falling 0.6% as manufacturers opted to draw down
existing inventories rather than increase production. On a positive note, exports rose 1.5% despite
declining trade with the U.S.

THE WEEK AHEAD

As the calendar turns to March, oil and gas prices are surging as the U.S. and Israeli assault on
Iran expands across the Middle East. The air war is already impacting energy production, and
interest rates and the U.S. dollar rose to begin the week as the potential for inflationary pressures
emerged. AI disruption and trade policy are also likely to continue complicating the outlook for
investors. Banks suffered losses late last week after the collapse of a UK mortgage provider raised
wider concerns about lending standards, adding another layer of risk to consider. Recently, rate
cut expectations for this year have been pared back, putting extra emphasis on this week’s U.S.
employment data. ADP private payrolls and Challenger job cuts data will precede Friday’s non-
farm payrolls report, in which economists are forecasting an increase of around 60,000 jobs for
February after the prior month’s surprisingly robust report. There will be an additional labor market
update before the Fed’s next rate decision on March 18. Other economic reports of note this week
include ISM manufacturing and services PMIs and January’s retail sales. Earnings reports to
watch are Target before the opening on Tuesday and semiconductor company Broadcom on
Wednesday after the bell. Overseas, China’s latest batch of PMI data arrives on Tuesday evening,
along with Australia’s Q4 2025 GDP. In Europe, investors have CPI, PPI, and retail sales data to
sort through, as well as accounts from the last central bank meeting.

(Schwab)