Wall Street got a degree of encouragement after data showed limited inflationary pressures from President Donald Trump’s trade war, with stocks rising and bond yields falling amid bets on at least two Federal Reserve interest-rate cuts this year.
Equities climbed toward the highest since February, the month marking the S&P 500’s latest all-time high. The Nasdaq 100 erased its 2025 losses. A rally in chipmakers also buoyed sentiment on news the US is preparing to announce a deal boosting Saudi Arabia’s ability to buy chips from the likes of Nvidia Corp. and Advanced Micro Devices Inc., which are considered the gold standard for artificial-intelligence models.
Treasury yields dropped across the curve, with the move led by policy-sensitive shorter maturities. Swap traders, who sharply lowered their expectations for Fed rate reductions on easing US-China trade tensions, priced in about 55 basis points of easing for the year, with the first cut still projected for September.
The consumer price index, excluding the often volatile food and energy categories, increased 0.2% from March, according to Bureau of Labor Statistics data out Tuesday. Compared with April of last year, the core CPI rose 2.8%, unchanged from the prior month. The overall CPI advanced 0.2%, and climbed 2.3% on an annual basis.
“If anything, the data reinforces the assumption that core inflation was trending lower pre-trade war, offering an encouraging departure point from which to absorb the inevitable tariff pass-through that will boost consumer prices in the coming months and quarters,” said Vail Hartman at BMO Capital Markets.
While the Trump administration’s tariffs are widely expected to boost inflation, companies may still be working their way through a massive stockpile of built-up inventory before resorting to raising prices. Many tariffs were rolled back — including those on China after a temporary agreement was reached over the weekend — but US importers are still wrestling with higher trade costs and fear they could jump again when the pause is up.
Meantime, JPMorgan Chase & Co. boosted its forecast for US economic growth after a temporary trade deal between the US and China, dropping its earlier call that the world’s largest economy would sink into a recession in 2025.
“The administration’s recent dialing down of some of the more draconian tariffs placed on China should reduce the risk that the US economy slips into recession this year,” JPMorgan Chief US Economist Michael Feroli said Tuesday in a note. “We believe recession risks are still elevated, but now below 50%.”
As markets soared on a truce in the trade war between the US and China, Citadel founder Ken Griffin reflected on the past month, suggesting it would have been better to sit on the sidelines in cash.
“It’s been a really difficult time for fundamental investors because so much of the value of the companies that we invest in is being dictated by very quickly changing policies from Washington,” Griffin said in an interview late Monday for an upcoming series for Bloomberg Originals, Bullish.
The reprieve in US-China trade tensions that sent stocks soaring on Monday has chart watchers anticipating fresh all-time highs for the S&P 500. According to John Kolovos, chief technical strategist at Macro Risk Advisors, there are now no more major resistance levels left until 6,144, the record hit on February 19.
“The S&P 500 trading above the 200-day moving average is another indication that the trend is turning positive,” Kolovos said. “This increases the odds that pullbacks will be met with increased demand or buying interest. It changes your strategy and sends the signal that we’re done with the bear market.”
The negative earnings-growth momentum that has plagued US equities for months is finally taking a turn for the better. A Citigroup Inc. gauge of earnings revisions, based on the number of upgrades and downgrades, has turned positive for the first time in six months, implying analysts’ estimates could soon be heading higher.
According to a Bloomberg Intelligence earnings tracker, 77% of S&P 500 members that reported surprised positively in the first quarter, the highest since the second quarter of last year. Meanwhile, earnings growth in the quarter is running at 13.1%, compared with just 6.6% expected before the start of the season.
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