Wall Street climbs as inflation slows down, S&P 500 erases loss

Most US stocks climbed on Tuesday following an encouraging report that showed inflation unexpectedly slowed across the country last month.

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The S&P 500 was up 0.8% in midday trading, coming off a big gain to start the week after the United States and China announced a 90-day pause in their trade war to allow for negotiations. The Dow Jones Industrial Average was down 152 points, or 0.4%, as of 11:30 a.m. Eastern time, and the Nasdaq composite was 1.6% higher as Al and other tech stocks led the way.

Stocks have been roaring back since the S&P 500 fell nearly 20% below its record last month on hopes that President Donald Trump will ease his stiff tariffs on trading partners worldwide before they create a recession and send inflation spiking higher. The S&P 500, which sits at the centre of many 401(k) accounts, is back within 4.1% of its all-time high set in February and has erased its losses for the year so far.

Tuesday's report said that even with all the uncertainty around trade, and even with many businesses rushing to import products from other countries before tariffs raise their prices, inflation slowed to 2.3% last month from 2.4% in March.

It's encouraging because such data pulls the economy further from a worst-case scenario called “stagflation,” one where the economy stagnates but inflation remains high. The Federal Reserve has no good tools to fix the toxic combination. It could try to lower rates to help the economy, for example, but that would likely lead to worse inflation in the short term.