The S&P 500 fell 1.4% to 6,624.70 Wednesday — its lowest close since November 2025 — after a February PPI print nearly double the consensus arrived six hours before the FOMC meeting and the Fed confirmed what the data implied. ^[1] The Dow dropped 1.6%, the Nasdaq 1.5%, the Russell 2000 1.4%. The Fed held at 3.5%–3.75%, revised its core PCE year-end forecast up to 2.7%, retained exactly one 25bp cut in its dot plot for the remainder of 2026, and formally incorporated Iran-driven oil risk into its economic language. ^[2] Iran's announced intent to strike Gulf energy infrastructure after US-Israeli airstrikes on South Pars drove Brent above $110. Only Energy finished in the green. ^[5]

What moved it

The BLS released February PPI at 8:30 AM: headline +0.7% month-over-month against a +0.3% consensus, pushing the year-over-year rate to +3.4%. Core PPI rose +0.5% m/m (est: +0.3%), with the annual rate accelerating to +3.9% — its highest in over a year. ^{[1] [7]} The largest contributors: fresh and dry vegetables (+48.9%), processed energy goods (+5.5%), and portfolio management fees (+1.0%). The print closed any remaining debate about the Fed's afternoon posture before Powell said a word.

The FOMC voted 11-1 — Gov. Miran dissented for a cut — to hold at 3.5%–3.75%. The updated Summary of Economic Projections retained one cut for the remainder of 2026 and raised the core PCE year-end forecast to 2.7% from 2.5%. ^{[3] [15]} At his press conference, Powell acknowledged that tariffs may account for half to three-quarters of current above-target inflation, named Middle East energy prices as a second-order complication for the path to 2%, and declined to define the conditions under which a hike becomes appropriate. Markets pushed the next expected cut to December 2026 or later. ^[6]

Iran provided the third compression point. Following US-Israeli airstrikes on the South Pars gas field and Asaluyeh oil facilities, Iran announced plans to strike energy infrastructure in Saudi Arabia, the UAE, and Qatar. ^[5] The Strait of Hormuz — roughly 20% of global oil flow — remains effectively closed. Brent surged more than 5% to near $110; WTI settled near $96; US national average gas prices reached $4.00 per gallon. Powell named the Middle East explicitly as "a big factor" for both the inflation path and rate decisions, completing the loop between the geopolitical event and the monetary policy event in a single press conference. ^[4]

Sector scoreboard

Energy (XLE) was the sole green sector, adding roughly half a percent — a direct read-through from Brent at $110. Everything else closed red. ^[13]

Technology (XLK) was the best of the decliners at –0.6%, carried partly by Nvidia's outperformance on China H200 news. Financials (XLF) dropped 0.7% as rate-cut repricing unwound whatever duration bets had been building since January. Health Care (XLV) and Consumer Discretionary (XLY) each fell 1.1%. Real Estate (XLRE) lagged at roughly –1.2% — rate-sensitive sectors absorbed the most direct pressure from both the yield backup and the extended-hold signal.

Breadth was decisively negative: within the Russell 2000, roughly 1,283 issues declined against 606 advancers, approximately a 2:1 ratio. ^[16]

Movers

Nvidia rose approximately 1% against a tape that was down 1.4% after Chinese regulators approved H200 chip sales to ByteDance, Alibaba, and Tencent — a collective order of over 400,000 units. ^{[8] [9]} CEO Jensen Huang confirmed purchase orders are in hand with production restarts underway, and raised the AI chip revenue forecast to at least $1 trillion by 2027. Wider China addressable market, in this tape, is the cleanest counter-narrative available.

Lululemon surged 5.1% intraday on a Q4 beat — EPS $5.01 vs. $4.79 estimated, revenue $3.64B vs. $3.58B estimated — and a board refreshment that added former Levi Strauss CEO Chip Bergh. ^[10] The gain reversed after hours when full-year guidance disappointed (see below).

After the bell

Micron Technology (MU) — Fiscal Q2 2026: Revenue $23.86B vs. $20.07B estimated (+18.9% beat). Adjusted EPS $12.20 vs. $9.31 estimated (+31%). Q3 guidance: revenue ~$33.5B (consensus: $24.3B); EPS ~$19.15 (consensus: $12.05). ^[11] Cloud memory revenue surged over 160% to $7.75B; HBM4 volume production for Nvidia's Vera Rubin platform began in Q1. CEO Sanjay Mehrotra cited structural supply constraints alongside AI demand as the primary drivers. Despite the beat across every metric and Q3 guidance that roughly doubled expectations, MU slipped in extended trading — the stock had already run approximately 30% in the prior two weeks.

Lululemon (LULU) — Q4 FY2025: Revenue and EPS both beat. FY2026 guidance did not: revenue $11.35B–$11.50B vs. $11.52B street estimate; EPS $12.10–$12.30 vs. $12.58 consensus, implying a decline from FY2025's $13.26. Americas comps guided down 1–3%. Shares slipped after hours, reversing the intraday gain. ^[12]

What to watch

Iran retaliation: Iran's stated intent to strike Gulf energy infrastructure has not yet translated into confirmed action. Any strike on Saudi, UAE, or Qatari facilities reprices oil from $96 and pushes the already-upgraded 2.7% core PCE forecast further out of reach.

Micron opening price Thursday: A 30% pre-earnings run into a beat-across-the-board that still faded after hours is the clearest sign of crowded positioning in AI memory. Thursday's open is the first read on whether the buy-the-beat trade has room or whether the 30% run captured it.

Weekly jobless claims (Thursday, 8:30 AM ET): February payrolls printed –92,000. Claims are the highest-frequency labor read the market has between now and the next FOMC. Any further softening puts the Fed between a weakening jobs market and a PPI print at +0.7% m/m — a combination the dot plot is not currently priced to handle. ^[14]

Fed district speakers: Powell's press conference framing — tariff-driven inflation, Middle East wildcard, no defined hike threshold — opens the door for voting members to sharpen or qualify the message. Any scheduled commentary Thursday moves December cut odds.