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 lower 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 center of many 401(k) accounts, is back within 4.2% of its all-time high.
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 15.5% after the cryptocurrency exchange learned its stock will join the widely followed S&P 500 index next week. Many funds will likewise add it to their holdings 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 4.7% and was the biggest single force lifting the S&P 500. Super Micro Computer, which builds servers used in AI, jumped 8.5%, and Palantir Technologies gained 4%.
Under Armour rose 1.3% after the athletic apparel company reported revenue for the latest quarter that was slightly above analysts’ expectations and a loss that matched Wall Street’s estimates. CEO Kevin Plank said the company is making progress on its plan to reset the brand, and the company gave a forecast range for revenue in the current quarter that topped some analysts’ expectations.
UnitedHealth Group shares tumbled 13% 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.
In the bond market, Treasury yields were holding relatively steady bit following the lower-than-expected data on inflation. The yield on the 10-year Treasury edged up to 4.47% from 4.45% late Monday.
The two-year Treasury yield, which moves more closely with expectations for Fed action, ticked up to 3.99% from 3.98%.
In stock markets abroad, indexes were rising modestly in Europe after finishing mixed in Asia. Stocks fell 1.9% in Shanghai but rose 1.4% in Tokyo.
Automakers were among the big gainers in Japan after the U.S. dollar surged against the Japanese yen. 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.
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AP Business Writers Matt Ott and Elaine Kurtenbach and AP video journalist Alice Fung contributed.