Stock Market Recap: Markets Adjust After Historic Rally as CPI Data Shows Inflation Cooling

Market Performance: Major Indexes Pull Back After Record Gains

U.S. stock markets are experiencing a pullback on Thursday, April 10, 2025, following Wednesday’s historic rally that saw major indexes post some of their best single-day performances in decades. The rally was triggered by President Trump’s announcement of a 90-day pause on most reciprocal tariffs that had been implemented earlier in the week.

As of midday trading, the major indexes are showing the following performance:

– Dow Jones Industrial Average (DJI): Trading lower after surging 7.9% (2,962.86 points) on Wednesday to close at 40,608.45, its biggest single-day percentage gain since March 2020.

– S&P 500: Pulling back after soaring 9.5% (474.13 points) yesterday to close at 5,456.90, recording its biggest single-day gain since 2008.

– Nasdaq Composite: Declining after rallying 12.2% (1,857.06 points) on Wednesday to finish at 17,124.97, marking its biggest single-day jump since January 2001 and the second-best day in its history.

Today’s market activity reflects investors digesting the implications of yesterday’s dramatic policy shift and this morning’s inflation data, with traders weighing the ongoing risks of potential trade disruptions.

Breaking News: March CPI Shows Unexpected Decline in Inflation

The Bureau of Labor Statistics released the March Consumer Price Index (CPI) this morning, showing inflation cooling more than expected:

– Headline CPI: Decreased 0.1% month-over-month, the first monthly decline in prices in nearly five years. The annual inflation rate fell to 2.4%, down from 2.8% in February and below economists’ expectations of 2.6%.

– Core CPI: (excluding food and energy) increased just 0.1% for the month and 2.8% year-over-year, the lowest rate for core inflation since March 2021.

Key factors driving the decline include:

– Gasoline prices fell 6.3%, contributing to a 2.4% broader decline in the energy index.
– Used car prices dropped 0.7%, while new vehicle costs increased just 0.1%.
– Shelter prices rose only 0.2% in March, with the annual increase slowing to 4%.
– Airline fares declined 5.3%, and prescription drug prices fell 2%.

Economists caution that this improvement in inflation may be temporary, as the impact of Trump’s tariff policies, particularly the increased 125% tariffs on Chinese goods, has yet to be fully reflected in consumer prices.

Tariff Policy Developments: 90-Day Pause with Exceptions

Markets are still adjusting to President Trump’s surprising policy shift announced Wednesday. Key developments include:

– A 90-day pause on most of the reciprocal tariffs that had gone into effect at midnight Tuesday.
– The blanket 10% tariffs on all countries will remain in place during this period.
– China faces significantly higher tariffs of 125% (up from 104%) after Beijing retaliated with an 84% tariff on U.S. imports.

Treasury Secretary Scott Bessent indicated that negotiations will take place during the 90-day pause period. The European Union has paused its first countermeasures against U.S. tariffs, though the bloc was not specifically mentioned in Trump’s statement.

Notable Stock Movements and Sector Performance

Several major stocks that had been under pressure after the initial tariff announcements led yesterday’s rally:

– Apple (AAPL): Surged 15.3% on Wednesday
– NVIDIA (NVDA): Soared 18% in the previous session
– Tesla (TSLA): Rallied 22.7% yesterday

Sector performance on Wednesday showed broad-based gains:
– Technology Select Sector SPDR (XLK) jumped 13.4%
– Consumer Discretionary Select Sector SPDR (XLY) advanced 10.9%
– Industrial Select Sector SPDR (XLI) rose 8.9%
– Communication Services Select Sector SPDR (XLC) rose 8.8%

Today’s trading is seeing more selective performance as investors reassess positions following the dramatic swings of the past week.

Upcoming Market Events to Watch

Several key economic events and data releases in the coming days could impact market direction:

– Friday, April 11: U.S. GDP data for February, UK manufacturing production, and German inflation figures

– Next Week: Earnings season begins to ramp up, with major financial institutions expected to report results

– Federal Reserve Policy: Minutes from the Fed’s March meeting released Wednesday revealed officials believe the economy still faces risks of higher inflation and slower growth. Market expectations now point to potential rate cuts beginning in June, with traders pricing in three to four cuts by year-end.

Market Outlook: Navigating Uncertainty

The market outlook remains clouded by significant policy uncertainty. While the 90-day tariff pause has provided temporary relief, several factors continue to weigh on investor sentiment:

1. The potential inflationary impact of the remaining 10% blanket tariffs and the elevated 125% tariffs on Chinese goods

2. Concerns about global economic growth as trade tensions persist, particularly with China

3. Uncertainty around the Federal Reserve’s rate path amid conflicting signals on inflation and growth

4. The upcoming U.S. election cycle adding another layer of policy uncertainty

Analysts suggest that market volatility may remain elevated as these factors play out. While today’s inflation data was encouraging, many economists believe the improvement may be temporary as tariff effects begin to work through the economy in the coming months.

As one analyst noted, “Today’s softer than expected CPI release feels backward looking given the large changes to trade policy seen in recent days. Going forward the Fed is likely to face a difficult trade-off as tariff driven price increases start to feed through to the inflation data and activity remains soft.”

Investors should continue monitoring developments in trade negotiations, upcoming economic data, and corporate earnings reports for signals about the market’s next direction.