Will the Stock Market’s Relief Rally Continue? Watch for Tuesday’s Consumer-Confidence Data

After enduring a sharp downturn earlier this month due to President Donald Trump’s inconsistent tariff policies, the U.S. stock market managed to scrape together a momentary relief rally last week. However, investors need to remain vigilant, as a slew of economic data released this week will likely determine the direction of this fragile momentum.

Recent Market Movements

Last week’s trading saw the three major indexes experience modest gains, indicating that while fear lingered, investors were cautiously optimistic. The S&P 500 managed a 0.5% weekly increase, the Dow Jones Industrial Average ticked up by 1.2%, and the Nasdaq Composite rose by 0.2%, according to FactSet data.

This uptick can be traced back to Trump’s remark about having “flexibility” regarding his tariff plans, which provided a glimmer of hope amid widespread uncertainty. However, the situation remains delicate as data on consumer confidence, personal spending, and the PCE price index is due for release, leaving traders on the edge of their seats.

Upcoming Economic Indicators

The spotlight is now on Tuesday’s Consumer Confidence Index, surveyed by the Conference Board. Economists polled by the Wall Street Journal predict a decline in U.S. consumer confidence to 95 in March, down from 98.3 in February. This would mark the fourth consecutive drop since the index reached a high of 112.8 in November.

Arthur Laffer Jr., president of Laffer Tengler Investments, argues that the environment of policy changes and tariff uncertainty will continue to keep consumers on edge. “You will see euphoria and then depression in the economic data, and then see the stock market going up and down, up and down, until things get clear,” he warned.

Market Outlook and Consumer Sentiment

Other analysts emphasize that while consumer-sentiment indicators like the Conference Board’s index may be seen as less relevant, their implications for long-term economic health should not be ignored. Melissa Brown, managing director of applied research at SimCorp, noted, “Consumer sentiment and investment sentiment don’t have to be in sync with each other over the short term.” Yet, she cautioned that in the long run, a lack of consumer confidence could spiral into recession if it translates to weaker corporate earnings.

Watch for Key Economic Data

As the week progresses, attention will turn to other critical economic indicators such as February’s durable-goods orders, retail inventories, personal spending, and the pivotal personal-consumption expenditures (PCE) price index. These reports may offer insights into whether business activity and consumer spending are indeed starting to slow, which could affect market sentiment significantly.

Laffer expressed concern that if consumers continue to hold back spending based on recent trends, businesses might start stockpiling goods—an action that could signal declining confidence and further exacerbate economic concerns.

The Fed and Inflation Outlook

Despite the turbulence in the markets, investors appear to have momentarily set aside fears of inflation,.

Federal Reserve Chair Jerome Powell's recent comments appeared to temper concerns about stagflation—a troubling combination of slow growth and rising prices. The Fed maintained interest rates in the range of 4.25% to 4.50% during its last meeting, with economists now anticipating two rate cuts by the end of 2025.

As for inflation metrics, economists expect the PCE to rise 0.3% in February, holding the 12-month rate steady at 2.5%. The core inflation rate is also forecasted to increase by 0.3% monthly and 2.7% annually, indicating that inflation concerns remain defused—at least for now.

Volatility Under the Surface

Even amid a tumultuous week, the Cboe Volatility Index (VIX), often considered Wall Street’s “fear gauge,” remained unusually low, ending the week down over 11% at 19.28. This abnormal calm suggests that investors may be lulled into a false sense of security, masking the deeper volatility that remains in the markets, as Brown pointed out. “Low volatility in markets [last week] was surprising because you would expect, given all this tariff uncertainty, that the market would be more volatile,” she remarked.

Conclusion

In the coming days, the U.S. financial markets will be watching the economic data closely, with the Consumer Confidence Index being an important indicator of whether the stock market can maintain its brief recovery or whether it will succumb to broader economic fears. As we navigate this unpredictable landscape, it is crucial for investors to stay informed and consider how these economic indicators will affect their investment strategies moving forward.