Following a positive report that revealed inflation unexpectedly decreased nationwide last month, most US markets rose on Tuesday. On a significant rise to begin the week on the announcement by the United States and China of a 90-day ceasefire in their trade war to allow for negotiations, the S&P 500 was up 0.8% in lunchtime trading. With AI and other tech firms leading the way, the Nasdaq composite was 1.6% higher at 11:30 a.m. Eastern time, while the Dow Jones Industrial Average was down 152 points, or 0.4%.
Since the S&P 500 dropped over 20% below its peak last month, stocks have been soaring back on expectations that President Donald Trump would loosen his strict tariffs on international trade partners before they cause a recession and drive up inflation. The S&P 500, which forms the basis of many 401(k) plans, has reversed its losses for the year and is now within 4.1% of its peak, which was reached in February.
According to Tuesday’s data, inflation dropped to 2.3% last month from 2.4% in March, despite all the trade uncertainties and the rush by many firms to purchase goods from other nations before tariffs boost their prices.
Such data is promising because it moves the economy closer to avoiding the worst-case scenario known as “stagflation,” in which inflation stays high but the economy stagnates. The Federal Reserve lacks effective instruments to address the hazardous mix. For instance, it may attempt to cut rates to boost the economy, although doing so would probably result in worse short-term inflation.
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