On Tuesday, US stock markets enjoyed an upward trend, buoyed by a positive inflation report indicating a surprising slowdown in price increases across the country last month. The S&P 500 index rose by 0.7%, building on its gains earlier in the week following a 90-day pause in the trade dispute between the US and China to facilitate negotiations. Meanwhile, the Dow Jones Industrial Average declined by 269 points, a drop of 0.6%, while the Nasdaq composite surged by 1.6%, largely driven by gains in technology and AI stocks.
The recent stock market recovery comes on the heels of the S&P 500’s near 20% plunge below its previous all-time high in February, ignited by anxieties surrounding potential recessionary impacts from President Trump’s tariffs. Currently, the S&P 500 is just 4.2% away from that peak and exhibiting gains year-to-date.
The inflation data revealed a decrease to 2.3% from 2.4% in March, offering hope as it mitigates fears of “stagflation,” a scenario where stagnant economic performance coexists with high inflation—a combination that poses considerable challenges for the Federal Reserve. Despite the encouraging report, experts warn that inflation might still rise in the coming months due to ongoing tariff impacts. This uncertainty may prompt the Fed to wait for more economic signals before adjusting interest rates.
Moreover, investors remain on alert for trade developments. Louis Wong from Phillip Securities advised caution, stressing that the trade deal is not finalised and that unexpected news could influence the market. Notably, notable stocks like Coinbase Global soared by 24% after its announcement of joining the S&P 500 index, a change expected to influence many investment funds.
In technology-related news, Nvidia led the gains in AI stocks, climbing 5.6% amid partnerships to supply chips for a data centre in Saudi Arabia. Other companies like Super Micro Computer and Palantir Technologies also saw substantial increases. However, UnitedHealth Group was a significant downer, plummeting 17.8% after withdrawing its full-year financial outlook due to higher-than-expected medical costs and announcing a leadership change.
Overall, the S&P 500 concluded the day at 5886.55, whereas the Dow fell to 42,140.43 and the Nasdaq climbed to 19,010.08. Treasury yields reflected optimism regarding the economy, with the 10-year Treasury yield rising to 4.48%. Internationally, stock markets displayed positive movements in much of Europe and Asia, even as Hong Kong faced a notable downturn. In Japan, automakers like Nissan experienced gains despite restructuring announcements following significant financial losses.
In summary, optimism around inflation containment and AI investments drove US stocks higher, but underlying uncertainties related to trade and inflation persist, prompting caution among investors.