The PPI Set the Tone Before Powell Could
Wednesday's most important data point came at 8:30 a.m., four hours before the Fed. February's Producer Price Index landed at +0.7% month-over-month — more than double the +0.3% consensus. Two months in a row of hot PPI. The first one in January was uncomfortable. The second one landing directly into an FOMC decision day changed the framing of everything that came after it. PPI feeds into CPI — what producers pay today shows up in consumer prices in the coming months. With oil near $100 and still grinding, March PPI is almost certainly going to be worse.
Equities started the session in the red and deepened the losses through the morning. The Dow was already down nearly 450 points before 2 p.m. Futures traders ripped cut expectations further out the calendar. Then came the decision itself.
What the Fed Actually Said
The vote was 11-1 to hold the federal funds rate at 3.50–3.75%. Widely expected, no market event by itself. The statement language was nearly identical to January's with two meaningful changes: the FOMC added a line acknowledging that the implications of the Middle East conflict "are uncertain," and changed how it described unemployment — from "showing signs of stabilization" to "little changed." That second edit is quiet but deliberate. The Fed is marking the –92,000 February NFP without overreacting to it publicly.
The dot plot kept one cut penciled in for 2026, unchanged from December. Seven of 19 participants now see rates flat all year — one more than in December. The SEP revised GDP slightly higher to 2.4% for 2026, and the 2026 inflation outlook moved to 2.7% from 2.5%. Higher growth and higher inflation simultaneously — the Fed's own projections now officially acknowledge the stagflation dynamic they've been carefully not naming.
The Phrase That Hit the Tape
Session lows came during the press conference. Powell covered the standard ground — data-dependent, not on a preset course, committed to both mandates. Then he was asked directly about inflation progress. His answer: "The forecast is that we will be making progress on inflation, not as much as we had hoped, but some progress on inflation."
The Dow hit –768 points within minutes. Because "not as much as hoped" strips away whatever residual optimism the one-cut dot plot was supposed to provide. It signals the trajectory toward that cut is slower and more uncertain than the headline projection implies. The September cut got repriced toward December. Even December looks fragile if March PPI follows February's trajectory.
"The forecast is that we will be making progress on inflation, not as much as we had hoped, but some progress on inflation." — Federal Reserve Chair Jerome Powell, March 18 press conference. The Dow shed 768 points at session lows following this exchange.
The 200-Day Break and What It Means
The S&P 500 closed at 6,624 — its lowest print of the year and below its 200-day moving average for the first time since early 2025. The 200-day break matters less because of any mystical technical significance and more because of how it's programmed. Systematic strategies, trend-following funds, and rules-based risk models all have trigger levels around the 200-day. When it breaks on volume, it causes additional forced selling that has nothing to do with fundamentals. The selling begets more selling.
The S&P is now roughly 7% below its January high. The definition of correction is 10%. There is not a lot of cushion left before that conversation gets louder. Add the Russell 2000 — which is already knocking on correction territory — and the breadth picture is deteriorating even if the headline index hasn't fully broken yet.
Powell's Last Months and the Succession Noise
Powell's term as Chair expires in May. Kevin Warsh is the White House's pick as successor, but Sen. Thom Tillis is blocking the nomination over the ongoing DOJ probe into the Fed's headquarters renovation. A federal judge tossed the subpoenas last week — the DOJ will appeal. Until it's resolved, Powell may serve as chair pro tempore past May. He said Wednesday: "I have no intention of leaving the board until the investigation is well and truly over." Markets don't love Fed leadership uncertainty under normal conditions. In this environment it's another headache layered onto an already chaotic setup.
Thursday brings jobless claims and the VIX will tell you by midday whether Wednesday's close was capitulation or just the latest step down. Watch whether the S&P can stabilize above 6,600. If it can't, the 6,500 level is the next test, and there isn't much in the way of structural support between here and there.