Stock Rally Fizzles as CPI Data Fails to Calm Investors

The stock market's roller coaster ride continued on Thursday, April 11, 2025, as investors grappled with the latest Consumer Price Index (CPI) data and the ongoing trade war. Despite a historic rally on Wednesday, fueled by President Donald Trump's announcement of a 90-day pause on tariffs for most U.S. trade partners, the market's euphoria quickly evaporated. The S&P 500 fell 189 points, or 3.5%, to close at 5,268, while the Dow Jones Industrial Average dropped 1,015 points, or 2.5%, and the Nasdaq Composite sank 4.3%.

The CPI data, released on Thursday, showed a decrease of 0.1% in March on a seasonally adjusted basis, reversing the 0.2% increase seen in February. On an annual basis, the CPI advanced 2.4% in March, down from 2.8% in February. This data suggested a cooling in inflation, which is generally seen as positive for the economy and markets. However, the market's reaction to this data was complicated by the ongoing trade tensions and political uncertainty.



The trade war between the U.S. and China continued to escalate, with China announcing more countermeasures against the U.S. and the White House clarifying that it will tax Chinese imports at 145%, not 125% as initially announced. This news sent shockwaves through the market, as investors worried about the potential impact on global trade and the economy.

The market's volatility was also reflected in the performance of individual stocks. Technology stocks, which had been leading the market's rally, were the biggest drag on markets in early trading Thursday, followed by the industrial and the financial sectors. Megacaps like Apple, Microsoft, Nvidia, Amazon, Meta, Alphabet, and Tesla all saw significant drops in premarket trading.

The CPI data also influenced expectations for the Federal Reserve's monetary policy. A significant fall in U.S. inflation would pave the way for the Fed to cut rates, while a negative surprise could delay the rate cut process. The Bureau of Labor Statistics' report on March 2025 CPI data showed that inflation in March rose 2.4% on an annual basis, a sign of progress in the Federal Reserve's battle to bring down inflation to a 2% rate. This data gave the Fed some breathing room to be more forceful in responding to market turmoil, as noted by equity analyst Adam Crisafulli, head of Vital Knowledge, in a report.

However, the market's reaction to the CPI data was muted, as investors remained focused on the ongoing trade war and its potential impact on the economy. The trade war isn't over, and an escalating battle between the world's two largest economies can create plenty of damage. U.S. stocks are also still below where they were just a week ago, indicating that the market's rally may have been premature.

The market's volatility is expected to persist as investors remain cautious amid ongoing uncertainty and assess the broader economic fallout, particularly for the US economy. The US500 index has decreased 545 points or 9.27% since the beginning of 2025, indicating a significant downturn. The materials also mention that the trade war isn't over, and an escalating battle between the world's two largest economies can create plenty of damage. U.S. stocks are still below where they were just a week ago, and technology stocks were the biggest drag on markets in early trading Thursday, followed by the industrial and the financial sectors. This suggests that the Big Tech sector, in particular, is likely to continue facing challenges in the near term.

In conclusion, the recent CPI data has influenced investor sentiment and market volatility by providing a mixed signal of economic health amidst ongoing trade tensions and political uncertainty. While the cooling inflation data is generally positive, the persistent trade war and political uncertainty continue to create market volatility and uncertainty. Investors will need to remain vigilant and adapt to the changing economic landscape as the trade war and its potential impact on the economy continue to unfold.