Wall Street climbs as inflation slows down, S&P 500 erases loss

Most US stocks climbed on Tuesday following an encouraging report that showed inflation unexpectedly slowed across the country last month.

The S&P 500 was up 0.8% in midday trading, coming off a big gain to start the week after the United States and China announced a 90-day pause in their trade war to allow for negotiations. The Dow Jones Industrial Average was down 152 points, or 0.4%, as of 11:30 a.m. Eastern time, and the Nasdaq composite was 1.6% higher as AI and other tech stocks led the way.

Stocks have been roaring back since the S&P 500 fell nearly 20% below its record last month on hopes that President Donald Trump will ease his stiff tariffs on trading partners worldwide before they create a recession and send inflation spiking higher. The S&P 500, which sits at the centre of many 401(k) accounts, is back within 4.1% of its all-time high set in February and has erased its losses for the year so far.

Tuesday’s report said that even with all the uncertainty around trade, and even with many businesses rushing to import products from other countries before tariffs raise their prices, inflation slowed to 2.3% last month from 2.4% in March.

It’s encouraging because such data pulls the economy further from a worst-case scenario called “stagflation,” one where the economy stagnates but inflation remains high. The Federal Reserve has no good tools to fix the toxic combination. It could try to lower rates to help the economy, for example, but that would likely lead to worse inflation in the short term.

Even with Tuesday’s encouraging report, though, economists and analysts say inflation may still run higher in coming months because of Trump’s tariffs. That will likely leave the Fed waiting for more data to guide their decision on whether and when to cut interest rates in order to help the economy.

It’s similar to the wait that investors in general are enduring. With the Fed set to make no moves on interest rates for the time being, markets will likely trade “with negotiation and reconciliation headlines,” according to Alexandra Wilson-Elizondo, global cohead and co-chief investment officer of multi-asset solutions within Goldman Sachs Asset Management.

“I think investors are aware that the trade deal is not done yet,” said Louis Wong, director for Phillip Securities Group in Hong Kong.

“I would advise investors to remain cautious in the near term and to be prepared for unexpected news from the trade front,” he added.

On Wall Street, Coinbase Global jumped 19.2% after the cryptocurrency exchange learned its stock will join the widely followed S&P 500 index next week. That means many investment funds will likewise add it before trading begins on Monday. Coinbase will replace Discover Financial Services, which is getting bought by Capital One Financial.

Stocks in the artificial-intelligence industry were also strong. Nvidia rose 5.5% and was the biggest single force lifting the S&P 500. Super Micro Computer, which builds servers used in AI, jumped 13%, and GE Vernova, which is hoping to power vast AI data centers, rose 5.6%. Palantir Technologies gained 7.3%.

They helped offset UnitedHealth Group, whose shares tumbled 16.1% after it suspended its full-year financial forecast due to higher-than-expected medical costs. The nation’s largest health insurer also announced that CEO Andrew Witty was stepping down for personal reasons and that Chairman Stephen Hemsley will become CEO, effective immediately.

UnitedHealth was the main reason the Dow was lagging behind other US stock indexes.

In the bond market, Treasury yields were ticking higher with hopes for the US economy. The yield on the 10-year Treasury rose to 4.48% from 4.45% late Monday. The two-year Treasury yield, which moves more closely with expectations for Fed action, ticked up to 4.00% from 3.98%.

In stock markets abroad, indexes were mixed across Europe and Asia. Stocks fell 1.9% in Shanghai but rose 1.4% in Tokyo. Automakers were among the big gainers in Japan. Nissan Motor Co. added 3% ahead of an announcement that it plans to lay off 20,000 of its workers as part of its restructuring efforts. The automaker said Tuesday that it racked up a loss of 670.9 billion yen ($4.5 billion) in the last fiscal year.

Crude oil futures climbed more than $1 a barrel on Tuesday, lifted by a temporary cut in U.S.-China tariffs and a better than expected inflation report.

Brent crude futures rose $1.11, or 1.71%, to $66.07 a barrel by 1443 GMT. US West Texas Intermediate (WTI) crude was up 95 cents, or 1.53%, at $62.90.

The two benchmarks rose by about 4% or more in the previous session after the US and China agreed on sharp reductions to tariffs for at least 90 days, which also boosted Wall Street stocks and the dollar.

“We didn’t participate as much as other markets did yesterday in the China boom, so we’re catching up today,” said John Kilduff, partner with Again Capital LLC. “Also the data this morning gives the Fed room to potentially begin making some moves.”

Agencies