S&P 500 futures are trading around 6,810, up 0.5% from Tuesday's close at 6,716. Russell 2000 futures (RTY) are leading at +1.0%, which tells you traders are leaning toward a softer Fed message before Powell has even started talking. The 10-year yield at 4.18%, down two basis points. WTI near $94, off Tuesday's close at $96.21. Brent above $100. VIX at 21.75. This market is tense, not settled.

The Hang Seng closed up 1.71% on China activity data. The Nikkei added 2.87%, led by automakers after Nvidia (NVDA) announced autonomous vehicle partnerships at GTC. Asia traded like the worst of the oil panic might be easing. Whether it holds after Powell speaks is a separate question.

Market Implication

If the dot plot holds at one cut, rate-sensitive names and small caps reverse this morning's gains. If it shifts toward two cuts, the market prices a growth slowdown into the energy shock and the rally extends. We get the answer this afternoon.

WTI has come down from its March 9 peak near $119.50 to the mid-$90s, mostly because emergency supply measures have helped calm the panic. But Hormuz is still shut in practical terms, and that means the market is still dealing with a real supply hit, not just scary headlines. The IEA says about 10 million barrels a day are effectively off the market. At that pace, the reserve buffer buys you roughly 26 days.

Trump’s push for a naval coalition hasn’t gotten traction. Japan, Australia, NATO, and the EU all declined. Commercial traffic is still blocked, even as Bessent makes room for Iranian tankers to keep moving.

Delta (DAL) raised its Q1 revenue forecast and jumped 6.6%. American (AAL) and United (UAL) gained over 3%. The market focused on strong bookings and looked past the fuel bill. That gap surfaces in earnings.

Structural Setup

If traffic through Hormuz starts moving normally before June, a lot of this oil fear comes out of the market and beaten-up rate-sensitive stocks can breathe again. Continued closure through month-end makes June the real policy reckoning.

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Tuesday's recovery was led by consumer discretionary (XLY +1%), with Expedia (EXPE) and Booking Holdings (BKNG) driving travel names on the demand-over-cost thesis. Value outperformed growth. Small caps beat large.

XLE saw modest profit-taking as oil pulled back. XLRE remains down over 5% on the month. High-yield spreads haven't normalized. Cyclicals moved higher while credit stayed wide. This looked more like traders covering and rotating than investors making a big new bet on growth.

Sector Read

EXPE, BKNG, SAP, and CRM can extend if the dot plot doesn’t shock the market. Travel is riding the idea that demand is holding up. Software is bouncing because the AI panic got ahead of the actual earnings damage. All give back if the Fed signals no cuts.

Today's meeting is the first where the FOMC has to update its outlook with higher oil, higher trade costs, and slower growth all hitting at once. Core PCE was at 2.8% before Hormuz closed. Energy costs will push it higher in February and March while the supply shock simultaneously destroys demand in manufacturing, freight, and supply chains. The Fed can’t comfortably cut with inflation heating up again, and it can’t feel good about sitting still if growth keeps slowing. Today’s projections probably won’t clear that up. They’ll just show how boxed in the Fed is. Powell's May 15 term expires after next meeting, with Warsh next in line. That means traders will listen to every line today with succession politics in the back of their mind.

Watch Signal

Watch the Fed's revised 2026 core PCE forecast in the SEP. If it moves above 3% while the dot plot keeps a cut on the table, the market reads that as a policy error in real time. QQQ and high-yield credit names move first.

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LULU reported Q4 EPS of $5.01 against a $4.78 estimate and revenue of $3.64 billion against $3.58 billion expected. The stock slipped anyway. Q1 guidance came in at $1.63-$1.68 in EPS against a $2.07 estimate. When guidance misses by that much, investors stop treating it like a one-quarter stumble.

LULU sources heavily from Vietnam and Cambodia. The 15% tariffs raise product costs, and the company is already leaning on promotions, which squeezes margins from both sides. International comparable sales grew 20%. Americas comps fell 1% and haven't grown in two years.

There is no permanent CEO. Calvin McDonald left January 31 and the board is searching with no timeline while Chip Wilson runs a proxy fight. Changing suppliers takes time, and it’s harder to do cleanly when the company is still looking for a permanent CEO.

The Read

If LULU's Americas comps turn positive in Q2, pricing power holds and names like NKE and UA re-rate alongside it. If they don't, premiums erode, margins compress, and the sector multiple contracts further without a policy reversal.

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Overnight: Nikkei +2.87% | Shanghai +0.32% | FTSE +0.29% | DAX +0.76%

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Powell will use the word patience twice before 3:00 PM. The question is whether he uses it to talk about inflation or growth.

If he frames patience around inflation, saying the Fed needs more time to see how energy costs flow through, the rate-sensitive rally probably unwinds before the close. If he frames it around growth, watching the energy shock's impact before adjusting, the door to a June cut stays open and cyclicals extend into Thursday.

The Strait of Hormuz has been closed for 18 days. The IEA reserve buffer covers roughly 26 days at current supply loss rates. We get the dot plot today, and it will shape how the market thinks about that window. If it closes before June, the market reprices without Fed action. If it doesn’t, June becomes the meeting where the Fed may have to choose between inflation that is moving back up and growth that is moving the wrong way.