U.S. Stock Market Climbs as Hotter Inflation and Trade Worries Take Center Stage

The U.S. stock market continued its upward trajectory on Monday, February 14, 2025, despite lingering concerns about inflation and trade uncertainties. The S&P 500 index rose 0.7%, coming off a losing week that was bookended by worries about potential tariffs and their impact on the economy. The Dow Jones Industrial Average added 167 points, or 0.4%, and the Nasdaq composite rallied 1% as Big Tech stocks led the way.



The market's resilience in the face of political events and tariff-related concerns can be seen in the performance of Big Tech stocks. Despite the threat of tariffs and geopolitical tensions, these companies have continued to perform well. For instance, Nvidia, a leading AI chipmaker, rose 2.9% on Monday, even after a Chinese startup, DeepSeek, claimed to have developed a large language model that could perform like the world's best without using top-flight chips. This resilience shows that investors are maintaining a long-term perspective, focusing on the companies' fundamentals and growth prospects rather than short-term political noise.

However, the market's gains come amidst concerns about rising inflation and trade uncertainties. The consumer price index (CPI) increased 3% in January from a year ago, according to a report from the Labor Department. This was up from 2.9% the previous month and from a 3 1/2 year low of 2.4% in September. The figures underscore the stickiness of inflation, which has created a major political problem for former President Joe Biden. President Donald Trump pledged to reduce prices in last year's campaign, though most economists worry that his many proposed tariffs could at least temporarily increase costs.

In equities trading, struggling pharmacy chain CVS Health soared 9.3% after it beat Wall Street’s modest sales and profit expectations. CVS’s profit fell well below the prior-year period, which the company partly blamed on increased medical costs in its insurance division. Ride-hailing app Lyft tumbled to a 14% loss in premarket trading, despite reporting stronger profits that Wall Street expected. Lyft missed revenue forecasts as higher prices weighed on bookings, the company said.



All around the world, uncertainty about how the Trump administration’s policies — particularly immigration and tariffs — has pushed Fed officials into a more cautious wait-and-see mode with regard to monetary policy. Most of Wall Street agrees that substantial and sustained tariffs would push up prices for U.S. households and ultimately lead to big pain for financial markets around the world. But Trump has also shown he can be quick to pull back on such threats. That’s what he did earlier with 25% tariffs he had announced for all imports from Canada and Mexico, suggesting tariffs may be merely a negotiating chip rather than a true long-term policy. That in turn has much of Wall Street hoping the worst-case scenario may not happen.

In conclusion, the U.S. stock market continues to climb despite concerns about hotter inflation and trade uncertainties. Investors are maintaining a long-term perspective, focusing on the fundamentals of the companies they invest in, rather than short-term political noise. However, the market's resilience and long-term perspective can be significantly impacted by political events and tariff-related concerns, particularly in sectors like Big Tech and insurance. As such, investors should remain vigilant and monitor the evolving situation closely.