If a week is a long time in politics, a day feels like an eternity in today’s financial markets. 

Just 24 hours ago, the S&P 500 was aiming for its first three-day gain in a month as the dollar eased, oil prices retreated and investor risk appetite improved.

Fast-forward to Thursday, however, and the world’s biggest stock benchmark is now at the lowest levels since November, having given back all of its gains for the past six months, bond markets are in turmoil over rate-hike talk from the Federal Reserve, and oil prices are soaring again following a worrying escalation in the U.S.-led war with Iran. 

And it’s likely to get gloomier. 

Inflation data are already showing elevated price pressures in the world’s biggest economy, and surging oil prices will only quicken the pace over the coming months.

Bond markets are now having to grapple with the rising odds of a rate hike, and pricing benchmark two-year note yields some 20 basis points north of the effective fed-funds rate.

There’s also talk of an export levy, or a ban altogether, of U.S. crude exports—a move seen as even more disruptive to global trade than last spring’s sweeping “Liberation Day” tariffs.  

Stock markets, meanwhile, are recalibrating for slower growth, fading risk sentiment, and the specter of stagflation, all of which are likely to test Wall Street’s twin assumptions of a sharp market rebound following a short Persian Gulf conflict.

The backdrop is now starting to mimic that of 2022, when Russia’s invasion of Ukraine stoked a surge in global crude prices, inflation pressures compelled a series of Fed rate hikes and the U.S. economy flirted with recession. That’s a trip back in time no one wants.

—Martin Baccardax

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The Federal Reserve held interest rates steady, as expected, but what Chair Jerome Powell said next was not. First, he said they aren’t prepared to simply “look through” the surge in oil prices triggered by war with Iran, breaking with the standard energy shock playbook. Second were comments about his timeline.

• Powell said that if his nominated successor, Kevin Warsh, isn’t confirmed before his chairmanship expires on May 15, he would stay as chair pro tem, adding he has no intention of leaving the board until a Justice Department investigation ends. Once that latter event happens, he hasn’t decided whether to stay.

• That means Powell could remain a voting member of the Federal Open Market Committee well into a Warsh chairmanship, adding a layer of complexity to an already fraught transition. Powell’s double message points to a Fed that is more constrained than it has been in years.

• After half a decade of inflation running above the 2% target, buffeted by the pandemic, tariffs, and now another energy shock, the policy committee’s instinct to treat oil-price spikes as temporary is no longer automatic. Powell conditioned any such approach on first seeing tariff-driven goods inflation recede.

• Core PCE inflation sits near 3%, and much of that, by Powell’s estimate, is the effect of tariffs. That implies the Fed will likely need to see genuine economic weakness before it cuts again. Wednesday was the second consecutive pause after three rate cuts. Governor Stephen Miran favored a cut.

What’s Next: Fed officials also had new economic projections, the most-watched being a chart of each official’s year-end rate forecast. The median still points to one cut this year, unchanged from December. But Powell said there has been a “meaningful” movement toward fewer cuts. Seven of 19 officials see no cuts.

—Nicole Goodkind and Janet H. Cho

Micron Technology plans to spend big on production projects as demand for memory chips surges, a trend that helped it triple second-quarter revenue. The quarterly results beat expectations as did guidance for the third quarter, when the company expects to accelerate its EPS amid the AI boom.

• For the second quarter, Micron reported adjusted earnings of $12.20 a share and revenue of $23.9 billion. It forecasts $33.5 billion in third quarter sales, an 81% gross margin, and adjusted EPS of $19.15. That would be a 903% jump from the year before.

• CEO Sanjay Mehrotra began the earnings call with a victory lap. That third-quarter revenue guidance “exceeds the full year revenue for every year in our company’s history through fiscal 2024,” he noted. “We anticipate exceptional records across revenue, gross margin, EPS and free cash flow.”

• The AI data center boom has led to a severe memory shortage, concentrated at the top end of memory and storage chips. Sales to data center customers were up 181% in the quarter. But that has rippled through the supply chain, leading to steep price increases for all types of memory.

• Sales to non-data center customers were up 219% from the year before. For more than a decade, Micron and the other two large memory makers, Samsung and SK Hynix have been in a very cyclical and commoditized business tied to demand for PCs and smartphones.

What’s Next: Micron told analysts it’s going to be spending more than $25 billion this fiscal year through August, mostly because of facilities. That’s higher than expectations. It also said 2027 fiscal spending on construction will run about $10 billion more than 2026.

—Adam Levine and Liz Moyer

With Brent crude prices surging above $110 a barrel overnight, Trump administration officials are racing to blunt the effect of rising energy on prices consumers pay for everyday items. President Donald Trump waived the century-old Jones Act Wednesday in an effort to lower oil and gas prices.

• He gave a 60 day waiver for the maritime law, which requires all vessels carrying goods between two U.S. ports to be American built and owned. The move is supposed to allow freer flows of oil, natural gas, fertilizer, and coal to U.S. ports amid the Iran war’s short-term disruptions to the oil market.

• In practice, the Jones Act requires that only must the ship be American owned, it must also be built in the U.S., crewed solely by Americans, and fly an American flag. MIT researchers have found that it has the effect of raising the cost of domestic shipping relative to the cost of sending stuff an equal distance internationally.

• Goldman Sachs analysts said a waiver would aid moving fuel from the Gulf Coast, where most refineries are located, to the East Coast, where a lot of the consumption happens. Jones-compliant transport from those points is as much as three times more expensive than getting oil from foreign vessels.

• That said, the waiver would only lower East Coast prices for products such as gasoline, jet fuel, and diesel by between 60 and 80 cents a barrel, Goldman Sachs concluded, citing the MIT research. Charlie Papavizas, a lawyer at Winston & Strawn, said past short-term waivers have been issued mainly after hurricanes. 

What’s Next: Vice President JD Vance, Energy Secretary Chris Wright, governors, and lawmakers will attend the American Petroleum Institute meeting today, a spokesperson confirms. While the API has a meeting every March, this time they will discuss the role of American oil and natural gas in supporting reliable energy supply amid global volatility.

—Laura Sanicola and Liz Moyer

Tesla CEO Elon Musk’s cryptic weekend tweet has roused speculation about whether he is planning to build a semiconductor fabrication facility, or fab, something that costs tens of billions of dollars to build. He could also have meant teaming with another company when he posted, “Terafab project launches in 7 days.”

• Musk has talked about Tesla’s need for enormous amounts of microchips to produce the millions of Tesla robo-taxis and Optimus humanoid robots he has set his mind on. Making 100 million robots alone would require 200 million chips, Morgan Stanley’s Andrew Percoco said in a note.

• Such a vast amount of chips would be 50 times its current demand across auto and robo-taxi, Percoco, an analyst, said. He believes Musk is referring to internal production capacity, but calls the creation of a Tesla semiconductor fab a “Herculean task.” 

• Based on his recent conversations with Tesla, Percoco thinks the creation of an internal fab would be tied to geopolitical concerns and Tesla’s Optimus program. Tesla management said AI computing power could become a bottleneck within three or four years, and that the constraint needs to be addressed soon, he said.

• Micron’s Boise fab for memory chips, for example, broke ground in 2022 and is expected to start producing in 2027. Percoco suggests Tesla could face a $35 billion to $40 billion bill to build its own capacity, which in an optimistic scenario could produce chips in 2028. 

What’s Next: Tesla typically spends less than $10 billion a year on new plants and equipment, but is spending $20 billion this year to ramp up its robot ambitions. Whatever Musk is planning, it’s going to be something investors should watch out for.

—Al Root and Janet H. Cho

FedEx’s fiscal third-quarter report, out after the bell Thursday, will be closely watched as a bellwether of economic activity, offering early insights into consumer demand amid Middle East tensions. Investors had expected a freight recovery in 2026, but that was before the Iran conflict, soaring oil prices, and the Supreme Court’s decision to overturn President Donald Trump’s Liberation Day tariffs.

• For the quarter, Wall Street is looking for earnings per share of $4.15 from sales of $23.5 billion. A year ago, FedEx reported fiscal 2025 third-quarter earnings per share of $4.51 on sales of $22.2 billion.