US Market Reaction to CPI Inflation Data: S and P 500, Nasdaq Rise, But Dow Jones Falls
The US stock market took a reprieve from two days of selling pressure and finished on a mixed note on Wednesday, March 13, as CPI inflation data came in lower than expected. The S&P 500 was slightly higher, but the Nasdaq Composite index rose substantially by 1.2%, boosted by technology firms. However, a drop in consumer staple companies pulled the Dow Jones. Wall Street fell sharply to its lowest level in over six months on March 10-11, as Trump dug down on his tariff proposals, sparking recession worries for the US economy. On Wednesday, the Dow Jones Industrial Average index fell 82.55 points, or 0.20%, to 41,350.93, while the S&P 500 index rose 27.23 points, or 0.49%, to 5,599.30.
Meanwhile, the Nasdaq Composite rose 212.35 points, or 1.22%, to 17,648.45. Wall Street gained pace after better-than-expected CPI data soothed economic fears. A robust comeback in battered tech equities also helped to drive the rally. Tech stocks were relentlessly sold in the preceding two sessions. However, the Dow Jones was weighed down by the retail behemoth Walmart’s stock price, which fell by about 3%, lowering the broader consumer staples index. Although the tech index is down 3% this week, prominent tech firms such as Nvidia rose 6.4%, AMD rose 4.1%, and Tesla rose 7.3%, emerging as major contributors to the Nasdaq’s surge.
The US inflation statistics came in lower than market expectations of 2.9%. This provided relief to investors. However, Trading Economics data showed President Trump’s steel and aluminum tariffs went into force, causing Canada to levy 25% retaliatory taxes on more than $20 billion in US exports. The European Union also moved immediately, introducing counter-tariffs on €26 billion in US goods that will take effect in April.
On the US market, Vinod Nair, Head of Research at Geojit Financial Services, stated on Wednesday, “Persistent uncertainties surrounding global trade and the fear of a US recession continue to influence the domestic market’s momentum.” Despite a return of valuation to the 5-year average and evidence of recovery in urban and rural demand, investor risk appetite remains muted.”
Inflation indexes fell more than predicted last month, bringing some respite to investors. However, the impact of recently imposed tariffs remains to be realized, and inflation may rise again in the coming months. The Federal Reserve is expected to make monetary policy decisions next week, hoping the federal funds rate will remain unchanged while revealing updated economic predictions for GDP growth, inflation, and unemployment. Meanwhile, trade tensions remain high after Wednesday the United States imposed a 25% tax on steel and aluminum imports from Canada, Australia, the European Union, and other nations. In retaliation, the European Union has imposed retaliatory taxes on US imports worth €26 billion, which will take effect in April.
