Stock Market Today: Indexes Surge on Cool Inflation Data, Rate-Cut Hopes

• The stock market, mired in one of its worst sell-offs in years, got a much-needed boost on Wednesday.
• Investors cheered the smallest inflation increase in four months, which came in below forecasts.
• It’s an encouraging sign for the future path of rate cuts, which could be used to fight an economic slowdown.

The stock market, rattled by President Donald Trump’s trade war, is seeing a glimmer of good news on Wednesday.

It came in the form of the latest inflation data, which showed that prices cooled slightly more than economists expected last month. The 0.2% increase was the smallest in four months.

The data comes at a time when Trump’s stuff tariffs have sparked economic-growth worries, and even calls for an imminent recession. And it’s being positively received because it’s seen as giving the Federal Reserve increased flexibility to fight a stalling economy with rate cuts — one of its most crucial anti-recession tools.

It also alleviates half of the equation for a fate worse than recession: stagflation, which features listless growth and stubbornly high inflation.

After immediate gains exceeding 1%, major US indexes pared increases as the morning progressed, with the Dow sliding into negative territory.

Here’s where they stood at 10:35 a.m. ET on Monday:

Some of the market’s most beaten-down names were sharply higher Wednesday, and the Magnificent Seven tech stocks all gained. Notably, Nvidia stock increased as much as 7%, while Tesla — which plummeted 15% on Monday, extending a more-than-50% sell-off — rose 9% at intraday highs.

US stocks are fresh off brutal two days that included the worst decline for the Nasdaq since 2022. The weeks-long tariff sell-off has erased nearly $5 trillion from the benchmark S&P 500 index since it peaked in mid-February.

“Today’s inflation report brings some much needed relief for equity markets, averting immediate concerns around stagflation and giving the Fed space to cut policy rates in the coming months if economic data continue to deteriorate,” Seema Shah, the chief global strategist at Principal Asset Management, wrote in a note.

She added that recent economic concerns mean there’s a likelihood a “Fed put” will need to come into play soon.

Investors have been increasingly concerned about a downturn in recent weeks, particularly after Trump followed through with his latest round of tariffs while also refusing to rule out a recession.

But while recession chatter is still making the rounds on Wall Street, cooler inflation is quelling fears that the US could see stagflation, a worst-case economic scenario that involves a slowing economy as well as stubbornly high price growth.

Importantly, the numbers are giving markets more confidence that the Fed has more room to lower interest rates, either in response to cooler inflation or to stimulate the economy in the event of a downturn.

“The tariff-battered markets are going to breathe a sigh of relief this morning, as higher inflation was the only thing that could make things worse,” Chris Zaccarelli, the chief investment officer at Northlight Asset Management, wrote, adding that he believed the Fed still has the flexibility to support a weakening economy.

Markets, though, are still expecting the Fed to show some restraint when lowering rates at coming policy meetings.

While investors are expecting a steeper pace of rate cuts by the end of 2025, investors see a 97% chance that the central bank will leave rates unchanged at the March 18-19 meeting, and a 68% chance that’s followed by another pause in May, according to the CME FedWatch tool.

Shah added that she believes stocks are unlikely to enter “full Fed put glee mode.”

“It’s worth remembering that this may be the calm CPI report before the storm. Not only does the Fed need to wait for tariff policy clarity, but once tariff implementation arrives it is likely to bring at least some price increases, with the inflation picture potentially getting uglier as the months go on. The Fed — and markets — are not yet in the clear,” Shah said.