---
A Cooler-Than-Expected Inflation Report
The Producer Price Index (PPI) for March came in significantly below expectations, rising just 0.5% — well under the anticipated 1.1% increase. Core PPI, which strips out the volatile food and energy categories, edged up a mere 0.1% against a forecasted 0.5% gain. Energy was the dominant force behind what little increase there was: the gasoline index surged approximately 16%, accounting for roughly half of the headline PPI rise. Diesel prices climbed a staggering 42%, and jet fuel prices jumped nearly 31%.
Despite the significance of these numbers, markets showed minimal reaction to the report. Equities maintained a solidly green posture throughout the session, gradually climbing as the day progressed. Treasury yields were also largely unchanged following the release, suggesting that traders had either priced in the softness or were looking past a single data point amid a complex macro backdrop.
A Shift in Tone from the Treasury Secretary
Perhaps more noteworthy than the PPI data itself was the evolving stance of Treasury Secretary Scott Bessent. After declaring in January that "the only ingredient missing for even stronger economic growth was immediate rate cuts," Bessent has now adopted a markedly more cautious tone. He is still calling for lower rates but is urging a wait-and-see approach, acknowledging that geopolitical risks — including conflict involving Iran and a sharp spike in oil prices — are clouding the economic outlook.
Bessent now says the Federal Reserve is right to be cautious, even as he remains confident that price pressures will ease over time. This is a stark departure from his earlier urgency and reflects a growing recognition that the intersection of inflation dynamics and global conflict demands prudence rather than haste.
Adding another layer of complexity, Bessent is backing Fed chair nominee Kevin Warsh, whose confirmation hearing is scheduled for the following week. However, that process is unlikely to be smooth — some legislators are withholding support until investigations into outgoing Chair Jerome Powell are completed, while others appear prepared to obstruct the nomination for political reasons.
International Markets and Emerging Market Momentum
A strong theme of the session was the notable performance of international equities. The ETF tracking South Korea (EWI) gained nearly 4% after an overnight rally in the KOSPI, driven by SK Hynix hitting a record high. Taiwan Semiconductor Manufacturing (TSM) advanced over 3% following a record close in the Taiwanese stock market, buoyed by the chipmaker's heavyweight status.
Emerging market ETFs broadly posted solid gains. BlackRock has shifted to an overweight position on emerging markets, though with a selective lens — favoring Asian nations that manufacture critical AI components. In the Chinese ADR space, JD.com surged nearly 8%, while Baidu climbed over 2% and PDD also advanced. These gains came despite a report from Nikkei Asia suggesting that e-commerce platforms could face fines related to food delivery practices, indicating that investors were willing to look past near-term regulatory headlines.
Quantum Computing Stocks Catch Fire
Among the riskier corners of the market, quantum computing stocks stood out with dramatic gains. IonQ, Rigetti, and D-Wave all posted double-digit percentage increases at various points during the session. The catalyst appeared to be Nvidia's announcement of a new set of AI models designed specifically to help build quantum computers.
While quantum computing remains in its early innings as a commercially viable technology, the market's enthusiasm reflects a growing conviction — or at least a growing bet — that this could become a revolutionary technology. Capital continues to pour into these names, driven by the hope that today's speculative investments will yield outsized returns as the technology matures.
Looking Ahead: Bank Earnings, Import Prices, and Housing
The next session promises a packed calendar. Bank of America and Morgan Stanley are set to report earnings, with expectations running high for both. Strong results are anticipated, driven by a rebound in investment banking activity and steady trading volumes — a trend already confirmed by earlier bank reports this earnings season. Bank of America carries bullish consensus sentiment with expected EPS of $0.36 on revenue of $19.62 billion, while Morgan Stanley, trading near a 52-week high, is expected to report earnings of $1.00 per share on revenue of $29.25 billion.
On the data front, import prices will be closely watched. In February, import prices rose 1.3% — the largest monthly gain since March 2022 — driven by higher fuel costs and, notably, nonfuel costs as well. The upcoming print will offer further evidence of how tariffs are passing through to import prices, a critical question for the inflation outlook.
Homebuilder confidence data will also draw attention, particularly given the housing market's persistent failure to rebound in any meaningful way despite broader market expectations. Finally, scheduled remarks from Fed officials Michael Barr and Michelle Bowman will be parsed for any signals about the central bank's policy direction, especially in light of the evolving commentary from the Treasury Department.
The Bigger Picture
This session captured a market navigating multiple crosscurrents: encouraging inflation data offset by geopolitical uncertainty, speculative enthusiasm in emerging technologies alongside cautious positioning in bonds, and a policy establishment that appears to be recalibrating its stance in real time. The soft PPI print offers a glimmer of hope that inflationary pressures may be easing, but the combination of energy price volatility, tariff pass-through effects, and global conflict ensures that the path ahead remains anything but straightforward.