Will the Stock Market’s Relief Rally Continue? Watch for Tuesday’s Consumer-Confidence Data

As the U.S. stock market seeks to maintain its recent gains, all eyes are on upcoming economic data releases that could influence investor confidence. After a sharp selloff earlier this month triggered by President Donald Trump’s unpredictable tariff plans, financial markets are just beginning to regain footing. This week, the spotlight will be on consumer confidence, personal spending, and the Personal Consumption Expenditures (PCE) index, as these indicators may dictate whether the stock market can extend its hard-won relief rally.

The Roller-Coaster of Markets

Last week saw a much-awaited rebound in the stock markets, alleviating some investor concerns. With Trump’s announcement of potential “flexibility” regarding his tariff strategies, the three major stock indexes managed to post modest gains. The S&P 500 gained 0.5% over the week, the Dow Jones Industrial Average rose 1.2%, and the Nasdaq Composite increased by 0.2%, as reported by FactSet data.

Despite these positive moves, analysts urge caution, noting that Wall Street’s journey is far from straight. Investors are now looking to Tuesday’s Consumer Confidence Index, surveyed by the Conference Board, as an essential metric that could dictate market movement. Economists from the Wall Street Journal predict a decline in consumer confidence to 95 in March, down from a previous 98.3. This would mark the fourth consecutive month of declines since the index reached a 16-month high of 112.8 last November.

Understanding Consumer Confidence’s Impact

Arthur Laffer Jr. of Laffer Tengler Investments posits that the current environment, characterized by major policy changes and ongoing tariff disputes, is causing consumers to feel uneasy. “You will see euphoria and then depression in the economic data. The stock market will go up and down until we achieve clarity,” he notes. This cyclical uncertainty places the market in a precarious position as consumer sentiment appears to be increasingly strained.

However, some analysts, like Melissa Brown from SimCorp, suggest that consumer sentiment may not correlate directly with market performance in the short term. “Consumer sentiment and investment sentiment don’t have to be in sync,” she explains, adding that while confidence may not be affecting immediate stock valuations, it is still something to monitor closely for potential long-term ramifications. A decline in consumer confidence might not impact the stock market unless these sentiments begin to reflect in corporate earnings—a clearer picture that won’t emerge until after the first quarter.

Upcoming Data Releases: What to Watch For

As the week progresses, investors will be focused on a series of economic indicators—particularly durable goods orders, retail inventories, personal spending, and the PCE index. These data sets may provide crucial insights into whether business activity is declining and whether consumer spending is indeed waning. “Another factor to consider is that weak consumer confidence could lead businesses to start stockpiling materials as a precaution, reflecting a shift in economic behavior,” Laffer noted.

Inflation Concerns and Market Reactions

Amidst ongoing inflation concerns, Federal Reserve Chair Jerome Powell made headlines last week by downplaying the risk of stagflation—a concerning combination of slowed growth and rising inflation—as a result of Trump’s trade policies. Investors have seemed somewhat indifferent to inflation data, as evidenced by the relatively calm Cboe Volatility Index (VIX), which serves as a measure of market volatility and investor fear. The VIX fell 11% last week to 19.28, indicating a level of stability despite the overall market uncertainty, but this tranquility might merely obscure underlying market turbulence.

With significant economic data expected this week, market participants are preparing for potential volatility. Economists forecast a PCE increase of 0.3% for February, keeping the annual rate stable at 2.5%. Likewise, core inflation—an important metric devoid of food and energy costs—is also projected to increase by 0.3% month-on-month and 2.7% year-on-year.

Conclusion: Buckle Up for Continued Volatility

The coming days are crucial for the U.S. stock market, as investors await data releases that will either bolster or undermine the market’s fragile recovery. Consumer confidence, spending habits, and inflation metrics will shape investor sentiment and market dynamics. As economic clarity emerges from the data, it may well determine whether the recent relief rally has the momentum to continue or if market fears will reassert themselves with renewed fervor.