March 12, 2025– U.S. stock markets fluctuated on Wednesday as investors digested fresh inflation data and mounting trade tensions with Canada. While the S&P 500 and Nasdaq posted gains, the Dow Jones Industrial Average struggled, reflecting ongoing economic uncertainty.
Inflation Eases, But Trade Concerns Weigh on Markets
A key report released Wednesday showed that consumer inflation moderated in February, offering a slight reprieve after January’s unexpectedly high reading. The Consumer Price Index (CPI) increased 2.8% year-over-year, slightly below forecasts, and rose just 0.2% from the previous month, easing investor concerns over accelerating price pressures.
Despite this, fears remain that President Trump’s new trade tariffs could drive up costs and hinder economic growth. The latest round of 25% tariffs on all steel and aluminum imports took effect early Wednesday, prompting swift retaliation from Canada, which announced new levies on $20.6 billion worth of U.S. goods. The European Union also responded with tariffs on American products such as bourbon whiskey, boats, and motorcycles.
While lower inflation could provide the Federal Reserve with room to maneuver on interest rates, trade tensions continue to overshadow market sentiment. “Right now, the concern on growth is impacting markets more than inflation,” said Adrian Helfert, chief investment officer at Westwood. “We could see growth rates drop to recessionary levels.”
Market Performance and Economic Indicators
- Stock Markets: The S&P 500 climbed 0.5%, reversing earlier losses, while the Nasdaq Composite gained 1.2%. The Dow Jones Industrial Average edged down 0.2% after swinging between gains and losses.
- Volatility: The Cboe Volatility Index (VIX), Wall Street’s so-called fear gauge, dipped slightly to around 24.
- Treasury Yields: The benchmark 10-year U.S. Treasury yield settled above 4.28% after surpassing 4.3% during the session.
- European Markets: Despite the tariff escalation, European stocks gained, with Germany’s DAX index rising over 1%.
- Currency Markets: The U.S. dollar strengthened slightly, bouncing off its lowest level since November.
Bank of Canada Responds to Economic Uncertainty
In response to weakening consumer spending and the growing trade dispute, the Bank of Canada lowered its main interest rate by a quarter point. “We’re now facing a new crisis,” said Bank of Canada Governor Tiff Macklem, underscoring the uncertainty surrounding global trade and economic growth.
With inflation concerns easing but trade disputes escalating, investors remain on edge, closely watching for signs of economic resilience or further volatility in the weeks ahead.
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