Stock market shrugs off recession fears to focus on the Fed and economy

U.S. stock rallied for a second straight session, shrugging off new recession fears after U.S. Treasury Secretary Scott Bessent couldn't rule one out and taking heart in a rebound in retail sales last month.

Bessent said in an NBC interview on Sunday there are "no guarantees" the United States will escape a recession. The comments come on the heels of President Donald Trump's Fox News interview the previous Sunday in which he did the same, causing stocks to plunge.

"I hate to predict things like that," Trump said when asked about the possibility of a recession. He added, "there is a period of transition because what we’re doing is very big."

Instead, investors found solace in February retail sales data showing consumers continue to spend. Consumers make up about 70% of U.S. economic growth.

Overall retail sales rose 0.2%, weaker than the Dow Jones average economist forecast of a 0.6% gain but better than the prior month's downwardly revised 1.2% decline. Excluding autos, retail sales increased 0.3%, in line with expectations.

More importantly, the so-called control group, which strips out non-core sectors and feeds directly into gross domestic product calculations, rose a strong 1%, topping expectations for a 0.4% increase. This "may act as a buoy of hope for investors," said Bret Kenwell, U.S. investment analyst at Israeli investing and trading platform eToro. It "could give investors some cautious optimism that perhaps we might see a more resilient consumer in the coming months. If the consumer can hold up, there’s a good chance the economy can too."

The broad S&P 500 closed up 0.64%, or 36.18 points, to 5,675.12 after dipping last week into correction territory, defined as at least 10% below its record high. The blue-chip Dow added 0.85%, or 353.44 points, to 41,841.63, after posting its worst week since 2023. The tech-laden Nasdaq gained 0.31%, or 54.48 points, to 17,808.66. The Nasdaq has been in a correction since March 6.

The benchmark 10-year yield fell to 4.297%.

Oil prices rose around a half a percentage point after the U.S. vowed to keep attacking Yemen’s Houthis until the Iran-aligned group ends its assaults on shipping. Trump launched military strikes against the Houthis on Saturday over the group’s attacks against Red Sea shipping. One U.S. official told Reuters the campaign might continue for weeks.

Stock corrections are natural

Stocks have been volatile in the last few weeks, whipsawed by Trump's aggressive tariff threats that have almost daily brought the U.S. to the brink of trade wars with major partners like Canada, Mexico and the European Union.

Even as stocks have plunged, Trump and his administration have played down the decline. In his interview, Trump said "you can't really watch the stock market."

Bessent echoed that sentiment on Sunday. "I’ve been in the investment business for 35 years, and I can tell you that corrections are healthy. They’re normal,” he said Sunday on NBC’s “Meet the Press.” “What’s not healthy is straight up, that you get these euphoric markets. That’s how you get a financial crisis."

Some market strategists agree.

"Aside from a compelling argument that the market was overdue for a downturn of this magnitude, 10% corrections usually don’t become 20% bear markets unless they’re accompanied by either an economic recession, an earnings recession, or a Fed hiking cycle," said Daniel Skelly, head of Morgan Stanley's wealth management market research & strategy team, last week when the S&P 500 was nearing a correction. "We’re not seeing any of those right now."

For perspective, Phil Blancato, chief market strategist at wealth management firm Osaic noted the S&P 500's decline isn't unprecedented even if its 6.1% decline in the first 48 trading days of the year is its worst start since 2020.

"Since 1928, there have been 17 years with similar drops, and 10 of those years ended positively," he said. "A notable example is 2003, when the S&P 500 reversed an 8.6% early-year loss to finish up 26.4%."

Federal Reserve meets this week

The week will bring fresh views from the Fed, which meets on interest rates again on Tuesday and Wednesday. Fed Chair Jerome Powell is expected to repeat what he said earlier this year: the central bank is in “no hurry” to lower interest rates.

Almost no one expects the Fed to change interest rates, but investors will be eager to hear where the Fed stands on its interest rate cutting cycle in light of potential re-inflation due to tariffs while the economy shows signs of slowing.

After this week's meeting, Fed officials will also release their economic projections with their policy statement. The projections will give investors a clearer picture of where different members see the economy, inflation and the labor market in the years ahead.

Blancato said, though, he believes that "as tariff and fiscal policy become clearer in the second half of the year, consumer confidence and sentiment about their future personal finance situation should improve along with business outlook...Recent inflation expectations from consumer surveys is overstated and should decline from historically high levels in the coming months."

Corporate news

• Incyte said phase three trial data for a skin condition treatment met the primary endpoints, but was effective for less than half of the participants who took it in the trials. Shares of the pharmaceutical company dropped 8.62%.
• Lockheed Martin shares inched up 0.31% after Canada's new Prime Minister Mark Carney ordered a review of a contract to buy its F-35 fighter jets.
• Affirm lost 4.23% after losing a deal with retail giant Walmart. Walmart inked an exclusive deal with rival Klarna for buy now, pay later loans.

Cryptocurrency

The crypto market remains at the mercy of overall market sentiment, swinging along with stocks on Trump's tariff whims

However, business intelligence company Stratagy remains a buyer. The company bought 130 bitcoin for $10.7 million at an average price of $82,981 per coin between March 10 and March 16, Securities and Exchange Commission filings show.

Bitcoin was last up 2.06% at $84,308.74.

(This story was updated with new information.)

Medora Lee is a money, markets, and personal finance reporter at USA TODAY. You can reach her at mjlee@usatoday.com and  subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday morning.