U.S. stock markets are showing resilience as easing inflation pressures and improving global trade sentiment support a renewed rally. As of today, the S&P 500 Index (S&P 500:SPX) is up 0.25%, the Nasdaq 100 Index (NASDAQ:NDX) has gained 0.51%, and the Dow Jones Industrial Average (DOWI:DJI) has dipped slightly by 0.40%. Markets are buoyed by signs that consumer prices are finally stabilizing, and investors are reacting positively.
CPI Data Signals Cooling Inflation
Investor sentiment was lifted after the U.S. Consumer Price Index (CPI) for April rose just 2.3% year-over-year, below the 2.4% forecast. Core CPI, which excludes volatile food and energy costs, remained stable at 2.8%—right in line with expectations. This soft inflation reading supports the idea that interest rates may not need to remain high for long, which adds fuel to stock market optimism.
In bond markets, the yield on 10-year U.S. Treasury notes eased to 4.453%, as bond traders priced in the likelihood of rate cuts. Swaps currently suggest only an 8% chance of a rate cut in June, but expectations could shift quickly if easing inflation pressures continue.
US-China Trade Truce Bolsters Confidence
The stock market also rallied earlier in the week after a breakthrough in U.S.-China relations. Both countries agreed to roll back tariffs, easing tensions and lowering the probability of a global economic slowdown. JPMorgan Chase (NYSE:JPM) revised its 2025 U.S. GDP forecast upward from 0.2% to 0.6%, citing reduced recession risks due to the trade deal.
Tech Stocks Lead the Stock Market Rally
Technology shares are leading gains, with chipmakers benefiting most from improved sentiment around global trade. Micron Technology (NASDAQ:MU), Intel Corp. (NASDAQ:INTC), and Advanced Micro Devices (NASDAQ:AMD) all rose by more than 2%. Others like Lam Research (NASDAQ:LRCX), Marvell Technology (NASDAQ:MRVL), ON Semiconductor (NASDAQ:ON), Broadcom (NASDAQ:AVGO), and Applied Materials (NASDAQ:AMAT) climbed over 1%.
Coinbase Global Inc. (NASDAQ:COIN) surged over 14% after news it will be added to the S&P 500 Index, effective May 19. Similarly, Super Micro Computer Inc. (NASDAQ:SMCI) gained more than 4% after Raymond James initiated coverage with an outperform rating.
Health Insurers Struggle Amid Leadership Shakeup
Not all sectors shared in the gains. Health insurance companies slumped after UnitedHealth Group Inc. (NYSE:UNH) dropped over 14% on news that its CEO, Andrew Witty, resigned unexpectedly. The company also suspended its 2025 outlook, citing rising medical costs. Other insurers followed suit: Elevance Health Inc. (NYSE:ELV) fell over 7%, Humana Inc. (NYSE:HUM) declined by more than 5%, and CVS Health Corp. (NYSE:CVS) was off by over 4%.
Defensive Stocks Underperform
Consumer staples and food and beverage stocks lagged in today’s rally, a typical pattern when markets shift toward riskier assets. Mondelez International Inc. (NASDAQ:MDLZ) led losses in the Nasdaq 100, with Kraft Heinz Co. (NASDAQ:KHC), PepsiCo Inc. (NASDAQ:PEP), and General Mills Inc. (NYSE:GIS) also trending lower.
Looking Ahead
Market focus now shifts to Thursday’s economic data, including April retail sales, manufacturing production, and producer price inflation. The April PPI is expected to rise by 0.2% month-over-month and 2.5% year-over-year, which could reinforce the narrative of easing inflation pressures if the numbers come in lower than anticipated.
Meanwhile, the May consumer sentiment index is expected to show improvement, signaling potential resilience in household spending.
Conclusion
With cooling CPI data and reduced trade tensions between the U.S. and China, investors are feeling more optimistic. If this trend of easing inflation pressures continues, it could pave the way for a sustained rally in equities, particularly in the technology and growth sectors. However, investors will continue to watch macroeconomic indicators closely for further confirmation that inflation is truly under control.
Featured Image – Depositphotos
