Trading in U.S. stocks mostly rebounded Wednesday after government report showed that U.S. inflation slowed more than expected in February.
The S&P 500 rose 39 points, or 0.7%, to 5,611 in early trading, a day after it briefly fell more than 10% below its all-time high set last month. The Dow Jones Industrial Average was down 132 points, or 0.3%, and the Nasdaq composite was 1.3% higher.
Inflation in February rose 2.8% from a year ago, slightly lower than economists had forecast, according to the latest Consumer Price Index data.
“Today’s inflation report brings some much needed relief for equity markets, averting immediate concerns around stagflation and giving the Fed space to cut policy rates in the coming months if economic data continue to deteriorate,” Seema Shah, chief global strategist at Principal Asset Management, said in an analyst note.
Markets have whipsawed in recent weeks, with investors spooked by the Trump administration’s protectionist trade policies. In the latest salvo, President Trump on Wednesday increased tariffs on all steel and aluminum imports to 25%, prompting immediate threats of retaliation by the European Union and Canada.
“Trump’s tariff policies continue to have a destabilizing effect on markets, with investors left guessing as to which measures will either be added or walked back next,” said Tim Waterer, chief market analyst at KCM Trade.
The recent market swings followed more warning signals about the economy as Mr. Trump’s on-and-off-again rollout of tariffs creates confusion among U.S. households and businesses.
Such tariffs can hurt the economy directly by raising prices for U.S. consumers and gumming up global trade. But even if they end up being milder than feared, all the whipsaw moves could leave U.S. companies and consumers unwilling to invest or spend, and looking to the Fed for a clearer economic outlook.
“As we entered 2025, investors’ main economic worry centered around reflation,” Bret Kenwell, U.S. investment analyst at eToro, said in a research note. “But as the trade war continues to escalate and as economic policy uncertainty continues to rise, that worry has shifted from inflation to the labor market and the economy as a whole. In that respect, it will take more than a few reassuring inflation reports to ease investors’ worries.”
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