[New York Stock Market] 'Relief on CPI Slowdown' S&P and Nasdaq Rise... Tariff Concerns Persist

February CPI Rises 2.8%, Showing Signs of Slowdown
Easing Inflation Fears Boost Investor Sentiment
EU and Canada Retaliatory Tariffs Limit Market Gains

The three major indices of the U.S. New York stock market closed mixed on the 12th (local time). As concerns over entrenched high inflation eased due to the slowdown in the February Consumer Price Index (CPI), buying interest centered on big tech stocks revived. However, investor caution remains as the aftershocks of the tariff war continue, with the European Union (EU), Canada, and others retaliating following the implementation of steel tariffs by U.S. President Donald Trump.

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On this day in the New York stock market, the blue-chip-focused Dow Jones Industrial Average (Dow) closed at 41,350.93, down 82.55 points (0.2%) from the previous trading day. The large-cap-focused S&P 500 rose 27.23 points (0.49%) to 5,599.3, and the tech-heavy Nasdaq increased by 212.36 points (1.22%) to close at 17,648.45.

Among individual stocks, large technology companies that had recently experienced significant declines rebounded. AI leader Nvidia surged 6.43%. U.S. semiconductor company AMD rose 4.16%. U.S. electric vehicle maker Tesla increased by 7.59%, and Meta, the parent company of Facebook, gained 2.29%.

The unexpected slowdown in last month's CPI drove the rise in major indices. According to the U.S. Department of Labor on this day, the February CPI rose 2.8% year-over-year, below the market forecast of 2.9%, and showing a deceleration compared to January's 3.0%. The core CPI, which excludes volatile energy and food prices, increased 0.2% month-over-month and 3.1% year-over-year, both below the previous month's figures (0.4%, 3.3%) and forecasts (0.3%, 3.2%). Amid heightened concerns about entrenched high inflation due to recent inflation rebounds, the slowdown in the CPI data brought relief to the market.

The U.S. Federal Reserve (Fed), which is expected to keep the benchmark interest rate unchanged for the time being, is also analyzed to have gained more flexibility in monetary policy operations due to this CPI slowdown. The market had anticipated that the resumption of Fed rate cuts would be delayed due to rising prices. The Fed will hold its regular Federal Open Market Committee (FOMC) meeting on the 18th-19th to decide on the benchmark interest rate, which currently stands at 4.25-4.5% annually.

Dave Gregsek, Investment Strategy and Research Managing Director at Espirient Wealth Management, said, "This indicator slightly dilutes discussions of stagflation (economic slowdown amid rising prices) and the Fed will regain some policy flexibility." He added, "If inflation figures had been higher, concerns might have grown that the Fed would be unable to respond even if the economy continued to slow."

However, it is premature to be reassured as there remains a possibility of rising prices in the future once the effects of President Donald Trump's tariffs are fully reflected. Ellen Zentner, Chief Strategist at Morgan Stanley, stated, "Today's lower-than-expected CPI figures brought a breath of fresh air, but one should not expect the Fed to immediately start cutting rates." She added, "Considering the uncertainties that trade and immigration policies may have on the economy, the Fed will want to see more than a month of favorable inflation data."

The aftershocks of the Trump-induced trade war, which continued on this day, stirred investor anxiety and limited the rise in indices. Canada announced that in response to the U.S. implementation of 25% tariffs on steel and aluminum, it will impose retaliatory tariffs of 25% starting from the 13th on $21 billion (approximately 31 trillion won) worth of U.S. steel, aluminum, computers, sports equipment, and cast iron products. Earlier, the EU also announced it would impose retaliatory tariffs from April on $28 billion (approximately 41 trillion won) worth of imports including U.S. steel, aluminum, beef, motorcycles, and whiskey. President Trump, when asked by reporters at the White House about responses to the EU's and others' retaliatory measures, replied, "Of course, we will respond," signaling further retaliation.

Investors' attention is focused on the Producer Price Index (PPI) to be released on the 13th, alongside U.S. and other countries' tariff policies. Following last month's CPI, it is crucial whether the wholesale price index, PPI, has also slowed. February PPI is expected to have risen 0.3% month-over-month, below the previous month's figure of 0.4%.

Government bond yields are rising. The U.S. 10-year Treasury yield, a global bond yield benchmark, rose 2 basis points (1bp = 0.01 percentage points) from the previous trading day to 4.31%, while the 2-year Treasury yield, sensitive to monetary policy, increased 5 basis points to around 3.99%.