The S&P Hangs On The Edge As Today’s CPI Report Looms Over Open

The March CPI report dropped at 8:30 a.m. ET Friday, and S&P 500 (CGSPC) futures are barely moving as the markets digest how much the Iran conflict has pushed up consumer prices.

S&P 500 (^GSPC) futures are up just over 5 points to nearly 6,869, a gain signaling caution rather than conviction. Consumer prices rose 0.9% for the month and 3.3% year-over-year, driven almost entirely by a 10.9% surge in energy costs tied to the U.S.-Iran conflict. The headline numbers matched Wall Street’s consensus, but the core reading came in softer than expected. What the CPI Is Expected to Show

The Fed’s preferred gauge, core PCE (which strips out food and energy prices), came in at 2.97% year-over-year in February, just below 3%. Services inflation ran at 3.26% year-over-year. The Fed has held its benchmark rate at 3.75% since December, and a hotter-than-expected CPI print would make any near-term rate cut politically impossible.

The 10-year Treasury yield, which closed at 4.29% on Wednesday, has risen about 0.2% over the past month. That matters because the S&P 500’s technology-heavy composition makes it particularly rate-sensitive. Information Technology alone accounts for nearly 33% of SPY’s weight, meaning any yield spike triggered by a hot CPI print would hit the index’s largest sector first.

A Rally Built on Positioning, Not Confidence

The index has recovered ground since the Iran conflict began. SPY closed Thursday near $680, up about 4% over the past week. The Nasdaq composite is now trading higher than when the Iran conflict began, but the cited reporting notes that this week’s rally appears to be more a function of positioning adjustments than genuine renewed confidence in the economic outlook. Buyers stepped in, but they are not necessarily believers.

For holders of SPDR S&P 500 ETF Trust (NYSEARCA:SPY) and Vanguard 500 Index Fund ETF Shares (NYSEARCA:VOO), the picture looks similar. VOO closed Thursday near $625, up about 4% over the past week, nearly matching SPY’s recovery. Both funds are essentially flat year-to-date, with SPY roughly flat and VOO essentially flat since January 1. SPY closed Thursday near $680 and VOO closed Thursday near $625.

The Geopolitical Wild Card

Today’s CPI release provides the first major economic data point to assess the Iran war’s actual inflationary consequences after six weeks of investor anxiety about oil supply disruptions. U.S.-Iran talks are scheduled for Saturday in Islamabad with Vice President Vance leading negotiations, but Iranian officials have made their attendance contingent on the situation in Lebanon. A fragile cease-fire is not the same as a resolved conflict, and energy markets will keep reacting to every development.