U.S. stocks saw a positive turn on Tuesday, bolstered by an unexpected slowdown in inflation reported for the previous month. The S&P 500 rose by 0.8% in the morning session, continuing its momentum from the start of the week, following a temporary 90-day pause in the trade war between the United States and China aimed at facilitating negotiations. Meanwhile, the Dow Jones Industrial Average experienced a slight decline, down 76 points or 0.2%, while the Nasdaq composite rallied 1.3%, driven predominantly by strong performances from tech and AI-related stocks.
The S&P 500’s rebound is notable, especially considering it had briefly plunged nearly 20% below its record high just a month ago. Investors are hopeful that potential tariff reductions from President Donald Trump could prevent a recession and mitigate inflation pressures. As of now, the index is only 4.2% shy of its all-time high.
The inflation data showed a decrease to 2.3% last month, down from 2.4% in March, which is a reassuring sign amid ongoing trade uncertainties. This decline helps move the economy away from a challenging scenario referred to as “stagflation,” characterized by stagnation and high inflation—a situation that poses significant challenges for the Federal Reserve, which has limited tools to combat this dual issue.
However, economists caution that inflation may still rise in the coming months due to the tariffs, prompting the Fed to remain vigilant as they consider future interest rate cuts to support the economy. Investment sentiment remains cautious, with analysts advising investors to stay alert for any unforeseen developments regarding trade.
On the stock front, Coinbase Global surged 15.5% after it was announced that the cryptocurrency exchange would be included in the S&P 500 next week. Tech stocks, particularly in artificial intelligence, saw notable gains, with Nvidia leading the pack with a 4.7% increase.
In contrast, Under Armour reported slightly better-than-expected revenues and is making strides in its brand recovery, while UnitedHealth Group’s shares plummeted by 13% following a suspension of its full-year financial forecast due to higher medical costs and the announcement of a leadership change.
Globally, stock markets showed modest gains, particularly in Europe, while there were mixed results in Asia, with notable movements in Japan’s automotive sector, driven by a significant rise in the U.S. dollar against the yen.
The current economic climate, although uncertain, does present opportunities for growth, particularly in innovative sectors like technology and AI. Investors are cautiously optimistic as they navigate the complexities of the trade landscape and its potential implications for the broader economy.