On Wednesday, the stock market saw gains after a soft inflation report eased concerns about the economy, leading investors to snap up beaten-down technology shares. The tech-heavy Nasdaq added 1.22% to close at 17,648.45, while the S&P 500 gained 0.49% to end at 5,599.30. However, the Dow slipped 82.55 points, or 0.2%, to settle at 41,350.93.
Although the tech sector has faced a more than 3% decline this week, it bounced back on Wednesday. Major tech companies like Amazon gained 6.4%, Google added more than 4%, and Facebook advanced 2%. Apple also jumped more than 7%.
The consumer price index, a broad measure of costs across the U.S. economy, increased by 0.2% in February, putting the annual inflation rate at 2.8%. This was lower than the Dow Jones estimates of 0.3% monthly and 2.9% annually. Core CPI, which excludes volatile food and energy prices, rose 0.2% for the month and 3.1% for the past 12 months, both below expectations.
This reading is going to be a little dilutive to the stagflation narrative, and it is going to restore some policy flexibility from the Fed,” said Dave Grecsek, managing director of investment strategy and research at Aspiriant Wealth Management. President Donald Trump’s steel and aluminum tariffs took effect on Wednesday, prompting Canada to announce tariffs on more than $20 billion worth of U.S. goods. The European Union also pledged to impose tariffs on $28.33 billion worth of U.S. imports beginning in April.
These escalating trade tensions have pressured stocks, with traders fearing a potential U.S. recession.
Tech stocks bounce amid easing inflation
This week alone, the Dow, S&P 500, and Nasdaq have each dropped roughly 3%.
Ned Davis Research suggested that recent stock sell-offs could 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. President Donald Trump’s unpredictable tariff policies have stirred markets in recent weeks.
Wolfe Research warns that more pain might be ahead due to mounting trade tensions. “We don’t buy the notion that he’s trying to cause a recession, but it’s clear he’s willing to tolerate significant pain,” wrote Tobin Marcus, the firm’s head of U.S. policy and politics. JPMorgan CEO Jamie Dimon indicated that geopolitical uncertainty is the economy’s biggest risk.
“The geopolitical stuff is paramount for the free world, far more important than what happens in the economy in the next six months,” he noted. Despite a slight pullback in small-cap stocks, Bank of America remains cautious about its long-term prospects. The bank’s strategist, Jill Carey Hall, preferred midcap stocks over small caps, citing potential risks from immigration reform, macroeconomic uncertainty, and refinancing issues.
Wednesday’s stock market session was marked by a rebound in tech stocks following a favorable inflation report. While tariffs and geopolitical concerns create uncertainty, some analysts believe the market sell-off may be overdone. Investors are advised to monitor ongoing policy developments and economic indicators to navigate the current volatile environment.
