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DATA DURING WARTIME: CPI, UMICH, FACTORY ORDERS

Investors embarked on the final day of a tumultuous week with a handful of data, dominated by the Labor Department's Consumer Price Index (CPI), which had the honor of being the first glimpse at price growth since the onset of the war on Iran.

The CPI report, which tracks the prices urban consumers pay for a basket of goods and services, grew by 0.9% last month, or triple February's increase.

Year-over-year, CPI posted a 3.3% increase, 0.9% hotter than the prior month's annual print.

Core CPI, which strips out volatile food and energy prices and is often referred to as "underlying inflation," came in cooler than consensus, posting 0.2% monthly growth, with the yearly figure edging 0.1 percentage point higher to 2.6%.

The U.S.-Israeli war on Iran, now about six weeks old, launched crude prices into the stratosphere and stoked worries of inflation. This report provides the first taste of the war's inflationary effects.

It's the second take on March inflation, after Friday's cooler-than-expected wage growth data.

"March core CPI doesn't yet reflect the reality of the oil supply shock, where the effect on real wage growth will bear the full brunt in April," writes Jamie Cox, managing partner at Harris Financial Group. "While I'm glad to see the effects to be less than expected in March, the effects in April are now more likely to be worse."

Line-by-line, a 10.9% monthly jump in energy prices prompted a 21.2% surge at the gasoline pump. Transportation costs rose 4.3% and the cost of an airline ticket rose by 2.7%. Food prices were unchanged.

The cost of shelter and services, two metrics closely watched by the Fed, rose 0.3% and 0.2%, respectively. Year-over-year, shelter prices have risen by 3.0% and services show annual growth of 3.1%. Both continue to coast well north of core inflation.

The big jump in gasoline prices, combined with the unexpected drop in personal income shown in Thursday's PCE report, is likely to spell hardship for the consumer.

"(The) drop in personal income, which was a real negative surprise," Peter Cardillo, chief market economist at Spartan Capital Securities, tells Reuters. "If that continues, obviously with elevated gas prices, that puts the consumer in a real bind and that just means there’s weaker economic activity ahead."

Speaking of which, the mood of the consumer, who shoulders about 70% of the U.S. economy, has tumbled by 10.7% this month, a much steeper drop than the 2.4% dip economists projected.

The University of Michigan's (UMich) initial take on March consumer sentiment USUMSP=ECI also showed survey respondents' assessment of current conditions deteriorated by 6.8%, and near-term expectations slid 10.8%.

"Consumer sentiment sank about 11% this month, extending a decline that began with the start of the Iran conflict, and is currently about 9% below a year ago," says Joanne Hsu, UMich's director of consumer surveys. "Demographic groups across age, income, and political party all posted setbacks in sentiment, as did every component of the index, reflecting the widespread nature of this month’s fall."

The closely scrutinized inflation expectations element showed survey participants' near-term inflation expectations jumping a full percentage point, to 4.8% from 3.8%.

That's 2.2 ppts hotter than today's year-on-year core CPI print.

Longer-term, consumers expect annual inflation of 3.4% five years from now, up 20 basis points from last month.

Switching to the manufacturing sector, new orders for U.S. factory-made merchandise USFORD=ECI were unchanged in February, a repeat of January's downwardly revised figure.

Notably, this is the only data on Friday that predates the Middle East tumult.

Below the headline, a 4.9% increase in computers/related products and a 3.2% rise in autos/parts were cancelled out by a 28.6% drop in commercial aircraft orders.

As shown in the graphic below, new factory orders have been generally flat, hovering in the $600 billion area since mid-2022, but are starting to show a gradual upward bias.

At the same time the ISM PMI has now clocked three consecutive months above the magic PMI level of 50, indicating factory activity has been on the upswing so far in 2026.

(Stephen Culp)

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EARLIER ON LIVE MARKETS:

THE GREAT AMERICAN WAGE DIVIDE CLICK HERE

S&P 500 NEAR FLAT AS INVESTORS WATCH FOR NEXT MIDDLE EAST DEVELOPMENTS CLICK HERE

US STOCK INDEX FUTURES NEAR FLAT AFTER AS-EXPECTED CPI CLICK HERE

HOPES FOR HUNGARY CLICK HERE

WE'LL HAVE TO WAIT TO SEE THE WAR'S IMPACT ON AIRLINES CLICK HERE

THIS RALLY COULD HAVE LEGS CLICK HERE

US COMPANIES TO POST STRONGEST Q1 EPS GROWTH IN FOUR YEARS CLICK HERE

STOXX SET FOR ITS THIRD SUCCESSIVE WEEKLY RISE CLICK HERE

EUROPE BEFORE THE BELL: OPENING GAINS BUT THEN WHAT? CLICK HERE

MORNING BID: 'THAT IS NOT THE AGREEMENT WE HAVE!' CLICK HERE