In a day of notable gains for U.S. financial markets, most stocks experienced an upswing on Tuesday, inspired by unexpectedly favorable inflation data. The S&P 500, a key indicator for U.S. stocks, advanced by 0.7%, marking a continuation of positive momentum from the previous day following the announcement of a 90-day suspension in the trade conflict between the United States and China. The Dow Jones Industrial Average, however, recorded a decline of 269 points, or 0.6%, while the tech-heavy Nasdaq composite surged by 1.6%, driven primarily by advancements in AI and other tech sectors.
Amid a climate of recent market turbulence that saw the S&P 500 nearly 20% below its peak last month, there’s hope that the current administration will reconsider the stringent import tariffs that potentially threaten to spur inflation and lead to a recession. With the S&P 500 climbing back to within 4.2% of its record-setting high in February, optimism reigns as it demonstrates a positive trend for the year.
According to the latest inflation report, even amidst trade uncertainties and an increased speed in product importation to counteract tariff impacts, there was a slowdown in inflation, moderating from 2.4% in March to 2.3%. This development distances the economy from stagflation, a scenario where economic stagnation is compounded by persistently high inflation, which would pose significant challenges for the Federal Reserve to address. Lowering interest rates to stimulate growth could have adverse inflationary consequences in the short term.
Nevertheless, the threat of higher inflation persists, attributed to existing tariffs, suggesting that the Federal Reserve might remain in a holding pattern as it seeks additional data to guide potential rate cuts that could bolster the economy. Investors, too, are waiting in anticipation, mindful of the ongoing trade negotiations and their implications. Alexandra Wilson-Elizondo from Goldman Sachs Asset Management anticipates market fluctuations driven by news related to these negotiations.
Louis Wong of Phillip Securities Group, while acknowledging trader awareness about the incomplete status of the trade deal, emphasizes the need for investor caution and preparedness for unforeseen developments on that front. Significant market movements were seen with Coinbase Global, which saw its stock leap 24%, prompted by the upcoming inclusion in the S&P 500 index. This milestone will necessitate investment adjustments by funds indexed to S&P 500, preceding Monday’s trading as Coinbase steps in for Discover Financial Services.
Significant gains were evident among artificial intelligence stocks, marking an uplife with Nvidia at the forefront, rising 5.6%. This outgoing boost was linked to its partnership with Saudi AI startup Humain, driving shipments for a data center project. Super Micro Computer, with roles in AI-focused server manufacturing, reported a 16% rise, while GE Vernova and Palantir Technologies saw robust gains at 4% and 8.1% respectively. These movements counterbalanced significant losses for UnitedHealth Group, which experienced a notable 17.8% drop following a halt in its financial forecast due to mounting medical expenses and a sudden CEO transition.
Ultimately, the S&P 500 ascended by 42.36 points to land at 5,886.55, while the Dow retracts to 42,140.43, and the Nasdaq gained 301.74 reaching a mark of 19,010.08. In the bond market, a rise in Treasury yields mirrored optimistic sentiments for the U.S. economy, with the 10-year Treasury yield inching up to 4.48% and the two-year yield moving up slightly to 4.01%.
Internationally, the stock landscape portrayed gains across European and Asian markets. Although Hong Kong’s market fell by 1.9%, Tokyo experienced a 1.4% rise. Japanese car manufacturers recorded notable gains, with Nissan Motor Co. advancing by 3% ahead of plans to announce comprehensive workforce reductions as part of its restructuring efforts, amidst reporting a significant financial loss.