The S&P 500 and Nasdaq rose on Wednesday after a soft inflation report eased concerns about the economy. The tech-heavy Nasdaq added 1.22% and closed at 17,648.45. The S&P 500 gained 0.49% to end at 5,599.30.
The CPI-based Ecumenical Underlying Inflation Measure was 3.0% in Feb, down from 3.1% in Jan. Notably little dispersion in 3/6 month measures w/ or w/o shelter etc. So uniformly an elevated story
Note CPI-PCE divergence has been unusually large so expect PCE-based to be lower. pic.twitter.com/wVThMiP1Iy
— Jason Furman (@jasonfurman) March 13, 2025
The Dow Jones Industrial Average slipped 82.55 points, or 0.2%, to settle at 41,350.93. The consumer price index (CPI) remained steady, putting the annual inflation rate at 2.8%. This was lower than the respective Dow Jones estimates for 0.3% and 2.9%.
Will come back this afternoon with CPI analysis and more charts. But for now, here are the main numbers for February—a bit lower than expected, easing somewhat, but still high. pic.twitter.com/4xbWBmPDKh
— Jason Furman (@jasonfurman) March 12, 2025
Core CPI rose 0.2% on the month and 3.1% for the past 12 months, both below expectations.
#NewsAlert | #US Feb consumer prices rise 2.8% YoY vs est of 2.9% (Agencies) pic.twitter.com/f0HBK5EqK9
— ET NOW (@ETNOWlive) March 12, 2025
“This reading is going to be a little dilutive to this stagflation narrative, and it is going to restore to some extent policy flexibility from the Fed,” said Dave Grecsek, managing director in investment strategy and research at Aspiriant Wealth Management. President Donald Trump’s steel and aluminum tariffs took effect on Wednesday.
Canada said it will impose tariffs on more than $20 billion worth of U.S. goods. The European Union also announced plans to retaliate on 26 billion euros, or $28.33 billion, worth of U.S. imports beginning in April. Stocks have been under pressure as traders fear the escalating tensions could trigger a U.S. recession.
Stocks rise amid easing inflation
Part of the reason for the recent sell-off has been concern that Trump’s volatile trade policy would raise inflation and slow growth. Investment research firm Ned Davis Research said these fears may be overblown.
“The overall takeaway from the reports and composite is that the market fears are out of proportion with market performance,” wrote Tim Hayes, the firm’s chief global investment strategist. Wolfe Research believes there’s likely to be more pain ahead when it comes to mounting trade tensions. “We’ve never been believers in an easy, mechanical ‘Trump put,’ and at this point, we think investors should take the President at his word.
He is determined to use tariffs to restructure the global economy, and we think he’s a long way from done, in terms of both time and pain tolerance,” wrote Tobin Marcus, the firm’s head of U.S. policy and politics. JPMorgan CEO Jamie Dimon said the geopolitical uncertainty is the biggest risk right now. “I think the geopolitical stuff is paramount for the free world, far more important than what happens in the economy in the next six months or so, for the next year or so,” Dimon said Wednesday at the BlackRock Retirement Summit.
Bank of America prefers midcaps over small-caps. “Small caps would also be more at risk from immigration reform. And though recession is not our base case, macro uncertainty and softer-than-expected data could continue to stymie small cap’s profits recovery, where 4Q guidance/commentary were weak,” wrote strategist Jill Carey Hall.
Wells Fargo Investment Institute advises investors to look for long-term signals amidst the current tariff-related market noise. “Focus on fundamentals, stay diversified, and avoid overreacting to headlines,” suggested the institute.