The S&P 500 traded near the flatline early Tuesday as investors paused to digest a softer-than-expected inflation report and assessed the market’s sharp rally in the previous session.
The Nasdaq Composite edged up 0.3%, while the Dow Jones Industrial Average underperformed, falling 186 points, or 0.4%, dragged down by an 11% decline in UnitedHealth.
Tuesday’s relatively subdued open follows a strong rebound on Monday after the US and China reached a deal to reduce steep tariffs for 90 days, easing fears of a prolonged trade war.
The agreement, reached during weekend negotiations in Switzerland, lowered “reciprocal” tariffs between the two countries to 10%.
However, the US will maintain 20% duties on Chinese imports related to fentanyl, leaving the total tariff burden on China at 30%.
Markets responded strongly to the tariff de-escalation. On Monday, the Dow surged more than 1,100 points, the S&P 500 gained over 3%, and the Nasdaq jumped 4.4%.
All three major averages recorded their best single-day performance since April 9, with the S&P 500 trimming its year-to-date losses to just 0.6%.
US inflation cools down
US inflation came in slightly below expectations in April, as the impact of President Donald Trump’s tariffs began to register in a slowing economy, according to data released Tuesday by the Labor Department.
The consumer price index (CPI) rose 0.2% on a seasonally adjusted basis for the month, aligning with the Dow Jones consensus estimate.
On an annual basis, CPI increased 2.3%, marking the lowest 12-month reading since February 2021 and coming in just below the forecast of 2.4%.
Core CPI, which excludes food and energy, also rose 0.2% for the month.
The year-over-year core reading was 2.8%, matching expectations.
The monthly core figure came in below the projected 0.3%, reflecting slightly softer inflation pressures.
Analysts raise targets for S&P 500
Goldman Sachs has reversed its recent bearish outlook on the S&P 500, raising its six-month target for the benchmark index to 6,100 from 5,900.
The shift comes just days after the bank warned of a potential 20% decline amid fears of a recession triggered by escalating tariffs.
The revision reflects a change in tone following signs of easing trade tensions between the United States and China.
The bank’s more optimistic view adds to a growing chorus on Wall Street.
Ed Yardeni of Yardeni Research also raised his S&P 500 forecast to 6,500 from 6,000 and lowered his estimated odds of a recession to 25%.
Wells Fargo’s Christopher Harvey remains the most bullish among major strategists, projecting the index to reach 7,007 by the end of 2025.
However, not all analysts share the upbeat sentiment.
Adam Clark of Barron’s highlighted that despite recent tariff rollbacks, the average US tariff rate remains at its highest level since 1941.
He also referenced data from the Yale Budget Lab, estimating that current tariffs cost the average US household about $2,300 annually—underscoring the continued economic drag that protectionist measures may pose.
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