S&P 500 futures are down 0.3% this morning, partially unwinding Monday's Hormuz relief rally after WTI reversed overnight — rising $2.36 to $96.16 on vessel-tracking data showing no additional non-Iranian commercial crossings of the Strait of Hormuz since the Aframax Karachi transited Monday.^[2] February PPI lands at 8:30 AM, the first inflation print since the energy shock began, and the Fed's two-day FOMC meeting opens this morning ahead of Wednesday's rate decision and dot plot. Small caps are leading the decline, off 0.7%, consistent with their higher sensitivity to energy costs and tighter credit.

What's driving it

Monday's oil trade was built on one tanker.^[1] Treasury Secretary Bessent said the U.S. was "allowing" Iranian vessels through the strait; the Karachi confirmed it in practice.^[2] Overnight, vessel tracking showed no follow-on non-Iranian cargo transits, and Iranian state media reported IRGC patrol activity resumed around western Gulf shipping lanes. The relief premium WTI shed in Monday's 4.8% decline is partially back. Bessent's stated target — oil "much lower than $80" — requires a pattern of transits, not a single proof-of-concept.^[4]

The second weight on futures is the FOMC itself. The meeting that begins this morning was calendared before the conflict began. What was a straightforward hold-and-soften-guidance session is now a stagflationary tightrope: the committee must revise its PCE forecast up and GDP down without signaling either a cut or a hike.^[5] The dot plot Wednesday is the first official projection to incorporate the post-February 28 energy shock. CME FedWatch shows a hold at near-certainty; the debate is whether the committee's median rate path for 2026 moves from one cut to zero.

On the calendar

February PPI at 8:30 AM is the morning's data event.^[6] February straddles the conflict's first week — crude topped $100 intraday on February 28 — and the consensus is headline monthly PPI of 0.3%, core of 0.2%. February was already a hot month for energy inputs; a print above 0.4% would reinforce the stagflation read heading into Powell's Wednesday presser. Housing starts and building permits for February are also due this morning; January came in at 1.487 million SAAR.^[7] A soft read would be the first evidence the energy shock is working through builder confidence. The FOMC rate decision and updated dot plot land at 2:00 PM Wednesday, followed by Powell at 2:30 PM.

Movers

Delta (DAL) is up 4% pre-market after raising Q1 revenue growth guidance to high-single digits, above a prior target of 5–7%.^[3] Against a backdrop of $5 diesel and surging jet fuel costs, the upward revision implies that premium travel demand is absorbing the energy shock in a way that leisure and freight cannot.

Eli Lilly (LLY) is down about 1.1% after HSBC downgraded the stock to "reduce" from "hold," arguing the total addressable market for GLP-1 obesity drugs is "inflated" relative to current valuations.^[3] With Lilly near its 2026 highs, a reduce-rated call from a major global bank carries more weight than the usual analyst note.

Earnings on deck

Lululemon (LULU) and DocuSign (DOCU) both report after the close today. Options markets are pricing Lululemon for approximately a 13% move on results — unusually large, reflecting genuine uncertainty about discretionary demand at elevated energy prices.^[9] Dollar Tree (DLTR) reported Monday: EPS of $2.56 beat the $2.52 estimate on revenue of $5.45 billion, but FY2026 EPS guidance of $6.50–$6.90 landed below the midpoint of buy-side expectations, and shares are mixed in pre-market.^[8]

The setup

The session has two sequential tests. At 8:30, if February PPI surprises to the upside, the ten-year backs up, the FOMC is visibly cornered going into Wednesday, and the question of zero 2026 cuts becomes the consensus.^[10] Before that print clears, the oil market is watching for any additional tanker confirmations through Hormuz — one ship made Monday, but a pattern would make Bessent's $80 forecast credible. Right now there's no pattern. Wednesday owns this week; today's job is to get there without undoing Monday's work.