This week, the U.S. CPI and PPI are set to be released, with inflation becoming the market's focus under the shadow of tariffs

According to the Zhitong Finance APP, last week, U.S. stocks fell sharply due to the lack of clarity in President Donald Trump's tariff plans and the potential impact of these plans on the overall economy overshadowing the market.

During the week, the S&P 500 index fell more than 3%, the Dow Jones Industrial Average declined over 2%, approximately 1,000 points. The Nasdaq Composite Index led the decline, dropping nearly 3.5%. The Nasdaq index has fallen more than 10% from its historical high in December last year, entering a correction zone.

In the coming week, key updates on inflation data will be closely watched, including the latest readings of the Producer Price Index (PPI) and the Consumer Price Index (CPI), as investors try to find clues on how tariffs might affect future price trends. Data related to inflation expectations and consumer confidence will also be released.

In a relatively quiet week for corporate earnings reports, the earnings reports of Oracle (ORCL.US) and Adobe (ADBE.US) will be the focus.

Federal Reserve Not "In a Hurry to Act"

The employment report for February released last Friday was uneventful. The U.S. labor market added 151,000 jobs that month, slightly below expectations, and the unemployment rate rose slightly to 4.1%. Given other signs of economic growth slowing, most economists considered this report better than feared.

Shruti Mishra, an economist at Bank of America, described the report as "generally a relief." Bloomberg data shows that the market still expects the Federal Reserve to cut rates three times in 2025.

However, the unresolved question in the market remains when the Federal Reserve will cut rates again. Federal Reserve Chairman Jerome Powell stated in a speech on Friday that further rate cuts may not come soon.

Powell said, "We do not need to rush to act; the current situation allows us to wait for more clarity."

As the Federal Reserve enters its quiet period before the next meeting on March 18-19, there will be no speeches from Federal Reserve officials in the coming week.

Price Monitoring

On Wednesday, the latest data on the pace of price increases will be released. Wall Street economists expect the CPI for February to show an annual inflation rate of 2.9%, down from 3% in January. According to economists' forecasts, prices are expected to rise 0.3% month-on-month, lower than January's increase of 0.5%.

The "core" CPI, excluding food and energy prices, is expected to rise 3.2% year-on-year in February, down from 3.3% in January. The monthly core price increase is expected to be 0.3%, lower than the previous month's 0.4%.

Wells Fargo senior economist Sarah House wrote in a report to clients that the CPI data for February is expected to only preliminarily reflect the impact of tariffs on inflation data.

House wrote, "Although we expect both overall inflation and core inflation rates to decline year-on-year in February, we expect inflation rates to begin to rise again this spring and maintain around 3% for the year, despite further easing of housing inflation and increasing signs of consumer fatigue."

Not Yet a "Recession" Trade

Recent market sell-offs have been driven by weaker-than-expected economic data and concerns that Trump's tariffs may lead to further economic weaknessEconomists from Morgan Stanley, JP Morgan, and Goldman Sachs have all lowered their forecasts for the U.S. GDP in the first quarter or for the entire year. However, it is noteworthy that they are not actually predicting a complete economic downturn. At least for now, the more likely scenario is that the U.S. economy will not grow as robustly as many had expected. In fact, not many economists have started talking about a recession. For example, with Goldman Sachs' updated forecast, the probability of a recession in the next 12 months has risen from 15% last year to 20%.

Currently, businesses are also not worried about a recession. According to data provider FactSet, only 13 companies mentioned the term "recession" during the earnings call of S&P 500 constituent companies this quarter. This is the lowest number of mentions since the first quarter of 2018.

This reflects that the repricing in the stock market over the past few weeks has largely been a recalibration of expectations, as many originally believed that the U.S. economy would perform exceptionally well this year.

Jason Furman, former chairman of the White House Council of Economic Advisers, told Yahoo Finance: "I don't think the economy will suddenly turn negative. But all the uncertainties, emotions, and other factors are driving the economic slowdown."