Macro View - February 28, 2026 (Morning)

 ## Macro Snapshot Markets are grappling with a complex interplay of geopolitical tensions, inflation dynamics, and evolving central bank policies. The recent U.S.-Israel strikes on Iran have injected fresh uncertainty into global risk sentiment, particularly impacting energy markets and defense-related sectors. While the conflict has not escalated into a broader regional war, the threat of disruption to Middle Eastern oil supplies has pushed oil prices higher and contributed to risk-off positioning in equities. Inflation data released overnight showed a mixed but generally elevated picture. January’s Producer Price Index (PPI) surprised to the upside with a 0.5% month-over-month increase in final demand and a 2.9% year-over-year rise, both above forecasts. Core PPI excluding food, energy, and trade services held steady at 0.3% monthly, indicating persistent underlying inflation pressures. These inflation prints reinforce the Federal Reserve’s cautious stance on monetary policy, suggesting that rate cuts this year are becoming less likely amid ongoing price pressures. The S&P 500 and Nasdaq 100 closed lower Friday, with the S&P down 0.48% and Nasdaq 0.63%, reflecting investor caution amid AI-driven economic disruption fears and banking sector selloffs. The Russell 2000 small-cap index underperformed, falling 1.72%, signaling risk aversion in more cyclical and growth-sensitive segments. Treasury bonds rallied, with the 7-10 year ETF (IEF) up 0.51%, reflecting a flight to quality, while the dollar showed slight weakness, down 0.07% on the UUP ETF. ## Overnight Global Markets - **Asia:** Data not available. - **Europe:** Data not available. ## Economic Data Today - **ISM Manufacturing PMI** at 3:00 PM ET – Forecast: 51.8, Previous: 52.6. This report will provide insight into the manufacturing sector’s health amid mixed inflation signals and geopolitical risks. A reading above 50 indicates expansion but a decline from January’s level could signal slowing momentum. - **Chicago PMI** at 2:45 PM ET – Actual: 57.7 vs. Forecast: 52.8, Previous: 54. This stronger-than-expected reading suggests robust regional manufacturing activity, potentially offsetting some concerns from the ISM report. - **Construction Spending** at 2:00 PM ET (Nov) and 3:00 PM ET (Dec) – Mixed results with November down 0.2% and December up 0.3%, indicating uneven investment trends in infrastructure and real estate. - No major releases outside these, but the labor market remains in focus ahead of the February Non-Farm Payrolls report, where stability is crucial given recent market jitters. ## Fed & Central Banks Fed rate cut expectations are fading as inflation data remains sticky and geopolitical risks elevate uncertainty. Commentary suggests the Fed is likely to maintain a cautious approach, balancing inflation control with economic growth concerns. The nomination of Kevin Warsh as Fed Chair nominee has drawn some market skepticism, adding to uncertainty about future policy direction. No new ECB or BOJ updates overnight, but global central banks remain vigilant amid inflation persistence and geopolitical risks. The market is watching for any shifts in tone that might signal a pause or acceleration in tightening cycles. ## Rates & Currencies Treasury yields softened as investors sought safe havens amid geopolitical tensions and inflation surprises. The 7-10 year Treasury ETF (IEF) rose 0.51%, and the 20+ year Treasury ETF (TLT) gained 0.55%, indicating demand for longer-duration government debt. The 1-3 year Treasury ETF (SHY) saw a smaller 0.13% increase, reflecting less movement in short-term rates. The U.S. dollar edged slightly lower, with the UUP ETF down 0.07%, pressured by risk-off flows and a modest decline in rate cut expectations. Dollar weakness could support commodities and emerging market assets but adds complexity for multinational corporations. Equities faced headwinds from rising oil prices and banking sector stress, with the Dow Jones falling 1.05% and the Russell 2000 down 1.72%, highlighting risk aversion in more economically sensitive areas. ## Commodities - **Oil:** Prices surged 2.73% to $81.95 per barrel amid fears of supply disruptions following U.S. and Israeli strikes on Iran. The geopolitical risk premium is driving energy markets higher, with OPEC+ reportedly considering aggressive production hikes to stabilize prices. - **Gold:** Advanced 1.31% to $483.75, benefiting from safe-haven demand amid Middle East tensions and inflation concerns. The metal’s rise underscores investor caution and a search for portfolio protection. - **Silver:** Jumped 5.64% to $84.99, reflecting a strong risk-off move and potential short squeeze dynamics amid broader precious metals strength. - **Natural Gas:** Increased 1.23% to $11.52, supported by seasonal demand and supply concerns. ## Macro Risks to Watch - **Geopolitical escalation in the Middle East:** The U.S.-Israel strikes on Iran have heightened tensions, with risks of further retaliation or broader regional conflict that could disrupt global energy supplies and financial markets. - **Inflation persistence:** Elevated PPI readings and sticky core inflation challenge the narrative of a near-term disinflation, complicating central bank policy and market expectations for rate cuts. - **Banking sector stress and AI-driven economic disruption:** Continued selloffs in bank and private equity stocks amid fears of AI-induced labor market shifts and credit tightening could exacerbate market volatility and risk appetite. ## Positioning Implications Traders should adopt a cautious stance heading into the week, balancing the defensive appeal of bonds and precious metals against selective opportunities in energy and defense sectors. The elevated geopolitical risk premium suggests a preference for quality and liquidity, while inflation data argues against aggressive easing bets. Equity investors may want to focus on resilient sectors and those benefiting from higher energy prices, while monitoring the evolving AI narrative that is reshaping market leadership. The upcoming ISM Manufacturing PMI and labor market reports will be key to assessing economic momentum and Fed policy trajectory. Overall, risk management and nimble positioning remain paramount as markets navigate a volatile macro environment marked by geopolitical uncertainty, inflation concerns, and shifting central bank expectations.