The stock market, mired in one of its worst sell-offs in years, got a much-needed boost Wednesday.
Investors cheered the smallest inflation increase in four months, which came in below forecasts.
It’s a positive sign for the path of rate cuts, which could be used to fight an economic slowdown.
The stock market, rattled by President Donald Trump’s trade war, saw a glimmer of good news on Wednesday.
It came in the form of the latest inflation data, which showed that prices cooled slightly more last month than economists had expected. The 0.2% increase was the smallest in four months.
The data came at a time when Trump’s tariffs have sparked economic-growth worries, and even calls for an imminent recession. It was positively received because it was seen as giving the Federal Reserve increased flexibility to fight a stalling economy with rate cuts — one of its most crucial anti-recession tools.
It also alleviated — at least temporarily — half the equation for a fate worse than recession: stagflation, which features listless growth and stubbornly high inflation.
After immediate gains exceeding 1%, major US indexes pared increases as the day progressed, with the Dow finishing in negative territory.
Here’s where indexes stood at the 4 p.m. market close on Monday:
Some of the market’s most beaten-down names were sharply higher Wednesday, and the Magnificent Seven tech stocks all gained. Notably, Nvidia stock increased as much as 7%, while Tesla — which plummeted 15% on Monday, extending a more than 50% sell-off — rose 9% at intraday highs.
US stocks are fresh off a brutal two days, which included the worst decline for the Nasdaq since 2022. The weekslong tariff sell-off has erased nearly $5 trillion from the benchmark S&P 500 index since it peaked in mid-February.
Wednesday’s inflation print brought “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, the chief global strategist at Principal Asset Management, wrote in a note.
She added that recent economic concerns meant there’s a likelihood a “Fed put” would need to come into play soon.
Investors have been increasingly concerned about a downturn in recent weeks, particularly after Trump followed through with his latest round of tariffs, while refusing to rule out a recession.
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