The Nasdaq Composite surged on Wednesday following a softer-than-expected inflation report, which alleviated economic concerns, and as investors took advantage of undervalued tech stocks.
The tech-heavy index gained 1.22%, closing at 17,648.45, while the S&P 500 rose by 0.49%, settling at 5,599.30. The Dow Jones Industrial Average, however, fell by 82.55 points, or 0.2%, ending the day at 41,350.93.
Despite the tech sector being down more than 3% for the week, it rebounded strongly on Wednesday, leading the S&P 500 higher. Nvidia surged 6.4%, AMD rose more than 4%, Meta Platforms advanced 2%, and Tesla saw a jump of over 7%.
The Consumer Price Index (CPI), which tracks price changes across the U.S. economy, climbed 0.2% in the past month, bringing the annual inflation rate to 2.8%. This was below Dow Jones estimates of a 0.3% rise and 2.9% year-over-year increase. Core CPI, which excludes volatile food and energy costs, also rose 0.2% monthly and 3.1% annually, both figures coming in lower than expected.
“This reading will dilute the stagflation narrative a bit and offer some policy flexibility for the Fed,” explained Dave Grecsek, managing director of investment strategy and research at Aspiriant Wealth Management. “Had this inflation number been higher, concerns would have mounted, with fears that the Fed wouldn’t be able to respond if the economy weakens further.”
In a separate development, President Donald Trump’s steel and aluminum tariffs went into effect on Wednesday, prompting Canada to announce retaliatory tariffs of 25% on over $20 billion worth of U.S. goods. The European Union also quickly responded, pledging to impose counter-tariffs on U.S. imports worth 26 billion euros ($28.33 billion) starting in April.
These escalating trade tensions have weighed on stocks, as investors worry they could lead to a U.S. recession. A key factor in the recent market decline is concern that Trump’s unpredictable trade policies could exacerbate inflation and stifle growth, fueling fears of stagflation.
So far this week, the Dow, S&P 500, and Nasdaq have all fallen around 3%. The S&P 500 briefly entered correction territory on Tuesday, dipping 10% from a February high. Over the past month, the S&P 500 has dropped more than 7%, while the Dow and Nasdaq have lost 6.8% and 10.2%, respectively.
“We’re not surprised by the market pullback,” said Grecsek. “U.S. equity markets have been exceptionally strong over the past two years, so a correction was to be expected. Once we get past the early stages of these significant fiscal policy changes, we anticipate better news ahead.”
