US stocks staged a rebound on Wednesday, with the Nasdaq leading gains as a softer-than-expected inflation report provided relief to investors worried about stagflation. The S&P 500 also advanced, driven by renewed strength in technology shares, while the Dow Jones Industrial Average lagged behind, weighed down by concerns over escalating trade tensions. The consumer price index showed a milder rise than anticipated, reinforcing expectations that the Federal Reserve may have more flexibility in its monetary policy decisions. However, market sentiment remained cautious as the implementation of new US tariffs on steel and aluminium sparked swift retaliatory measures from Canada and the European Union, adding to concerns about a potential economic slowdown.

Key Takeaways:

  • Nasdaq Leads Gains as Tech Stocks Rebound: The Nasdaq Composite surged 1.22% to close at 17,648.45, leading the broader market higher as technology stocks bounced back following a sharp sell-off earlier in the week. Despite the rally, the Nasdaq remains down 10.2% over the past month as concerns over trade tensions and economic growth persist.
  • S&P 500 Rises on Softer Inflation, But Remains Under Pressure: The S&P 500 added 0.49% to finish at 5,599.30, clawing back some of its recent losses as a weaker-than-expected consumer price index reassured investors. The index has been under pressure this week, down roughly 3% and briefly entering correction territory on Tuesday, having fallen 10% from its February peak. 
  • Dow Jones Lags as Trade War Fears Persist: The Dow Jones Industrial Average slipped 82.55 points, or 0.2%, to close at 41,350.93, underperforming its peers as investors remained wary of escalating trade tensions. Fears that the escalating trade war could trigger a US recession and drive up inflation have weighed on sentiment, leaving the Dow down 6.8% over the past month.
  • European Markets Gain Despite US-EU Tariff Escalation: European markets advanced on Wednesday, with the Stoxx 600 rising 0.8%, despite mounting trade tensions with the US. The FTSE 100 gained 44.98 points, or 0.53%, to close at 8,540.97, while France’s CAC 40 added 47 points, or 0.59%. Italy’s FTSE MIB outperformed, jumping 609 points, or 1.61%, as investor sentiment improved on hopes of a diplomatic resolution. Germany’s DAX index climbed 348 points, or 1.56%. Retail stocks struggled, with the Stoxx Europe Retail Index down 3% after Spanish fashion giant Inditex tumbled 7.5% on weaker-than-expected fourth-quarter sales growth. In contrast, Zealand Pharma surged 38% after announcing a partnership with Roche to co-develop an obesity drug.
  • Asia-Pacific Markets Trade Mixed Amid Trade and Recession Concerns: Asian markets showed a mixed performance on Wednesday, reflecting investor uncertainty over US trade policies and the broader global economic outlook. Japan’s Nikkei 225 finished flat at 36,819.09, while the broader Topix index gained 0.91% to 2,694.91. Nissan shares inched up 0.61% as the automaker announced CEO Makoto Uchida would step down in April, fuelling speculation about renewed merger talks with Honda. Meanwhile, South Korea’s Kospi index climbed 1.47% to 2,574.82, with the small-cap Kosdaq rising 1.11% to 729.49. In China, the Hang Seng Index fell 1.36%, while the CSI 300 dropped 0.36% to 3,927.23. Australia’s S&P/ASX 200 underperformed, sliding 1.32% to 7,786.20.
  • US Consumer Inflation Cools, Offering Fed Policy Flexibility: The latest inflation report showed a softer-than-expected rise in consumer prices, easing fears of stagflation. The Consumer Price Index (CPI) rose 0.2% in February, down from January’s 0.5% increase, bringing the annual inflation rate to 2.8%. This was below market expectations of 2.9%. Core CPI, which excludes food and energy, climbed 0.2% on the month and 3.1% over the past year, also coming in below estimates. Shelter costs continued to rise, up 0.3%, while airline fares dropped 4%, signalling weaker travel demand. Meanwhile, egg prices surged 10.4% due to ongoing supply shortages, bringing the annual increase to 58.8%. 
  • Treasury Yields Climb as Stagflation Fears Ease: US Treasury yields moved higher on Wednesday as the softer inflation report helped alleviate concerns about persistent stagflation. The 10-year Treasury yield rose more than 3 basis points to 4.322%, while the 2-year yield climbed nearly 6 basis points to 3.997%. 
  • Oil Prices Edge Higher on Weaker Dollar, But Tariff Concerns Cap Gains: Oil prices rose on Wednesday, supported by a weaker US dollar, though concerns over the potential impact of trade tariffs on global economic growth limited the upside. Brent crude climbed $1.38, or 1.98%, to $70.94 per barrel, while West Texas Intermediate (WTI) crude advanced $1.40, or 2.11%, to $67.65 per barrel. 

FX Today:

  • EUR/USD Retreats After Failing to Sustain Rally: The EUR/USD pair ended the session at 1.0893, slipping 0.23% after failing to hold above the key 1.0900 level. The euro initially climbed to an intraday high of 1.0930 but faced selling pressure, leading to a pullback toward the 1.0875 support zone. The pair has recently moved above key moving averages, with the 50-day SMA at 1.0446, the 100-day SMA at 1.0517, and the 200-day SMA at 1.0726, reinforcing the broader bullish trend. However, upside momentum appears to be stalling, with resistance at 1.0950 capping gains. A move above this level would open the door for a potential retest of 1.1000, while further downside could see the pair test support at 1.0850, followed by the 1.0800 level.
  • GBP/USD Holds Gains After Testing Resistance: GBP/USD closed at 1.2969, rising 0.15% after briefly testing the psychological 1.3000 level. The pair reached a session high of 1.2988 before encountering resistance and pulling back slightly. Support remains firm at 1.2913, with the 50-day SMA at 1.2514, the 100-day SMA at 1.2624, and the 200-day SMA at 1.2792 providing further downside protection. If GBP/USD can sustain a breakout above 1.3000, it may target 1.3100, a level last seen in mid-2024. However, failure to hold gains could lead to a correction toward 1.2850, with additional support at 1.2780. 
  • USD/CAD Weakens as Resistance at 1.4500 Holds: The USD/CAD pair ended the day lower at 1.4372, declining 0.43% after failing to break through the 1.4480 level. The pair briefly touched a session high of 1.4484 before facing strong selling pressure, which pushed it toward support at 1.4352. Despite the pullback, USD/CAD remains in an uptrend, with the 50-day SMA at 1.4346, the 100-day SMA at 1.4210, and the 200-day SMA at 1.3935. Immediate resistance stands at 1.4450, followed by the key 1.4500 level, where sellers have repeatedly emerged. A break below 1.4300 could see the pair extend losses toward the 100-day SMA at 1.4210, while a move above 1.4450 would reaffirm bullish control, potentially driving USD/CAD toward 1.4600.
  • AUD/USD Extends Recovery, But Momentum Remains Cautious:  AUD/USD closed at 0.6318, gaining 0.32% after trading between a session low of 0.6276 and a high of 0.6319. The pair has rebounded from recent lows but remains below key moving averages, signalling a cautious outlook. The 50-day SMA at 0.6269 provides near-term support, while the 100-day SMA at 0.6363 and the 200-day SMA at 0.6528 serve as resistance levels. AUD/USD has been in a recovery phase since bouncing from 0.6200 in early March, but upside momentum appears limited. A push above 0.6350 would improve sentiment, with stronger resistance near 0.6400. On the downside, a break below 0.6260 could see the pair revisit the 0.6200 level, where buyers previously stepped in.
  • Gold Prices Hold Gains as Inflation Data Supports Bullish Sentiment:  Gold ended the session at 2,933, rising 0.60% after reaching an intraday high of 2,940. The metal briefly dipped to a session low of 2,906 but remained well-supported as investors continued to seek safe-haven assets. The 50-day SMA at 2,816, the 100-day SMA at 2,737, and the 200-day SMA at 2,608 confirm a strong bullish trend, with gold holding above the key 2,900 level in recent sessions. If momentum continues, the next resistance stands at 2,950, followed by the critical psychological level of 3,000. On the downside, support is found at 2,900, with additional buyers likely stepping in near 2,850. 

Market Movers:

  • Tesla Surges as Tech Stocks Rebound: Tesla (TSLA) led gains in the S&P 500 and Nasdaq 100, closing up more than 7% as investors rotated back into tech stocks. 
  • Nvidia Jumps on Renewed Chip Sector Optimism: Nvidia (NVDA) soared 6.4%, making it one of the best performers in the Dow Jones Industrial Average. 
  • Groupon Soars After Beating Revenue Forecasts: Groupon (GRPN) surged 42% after projecting full-year revenue of $493 million to $500 million, surpassing analyst expectations of $491.3 million. 
  • Airline Stocks Decline as United Airlines Sinks 4%: United Airlines (UAL) fell 4% after TD Cowen cut its price target on the stock to $150 from $165. Other airline stocks also declined, with American Airlines (AAL) down more than 5% and Delta Airlines (DAL) falling over 3%.
  • iRobot Plunges After Weak Earnings Report: iRobot (IRBT) crashed 36% after posting disappointing fourth-quarter revenue of $172 million, missing analyst expectations of $181 million. The sharp decline made it the worst performer of the session.

As the trading session came to a close, US markets staged a partial rebound, with the Nasdaq climbing over 1% as technology stocks regained ground following a sharp sell-off earlier in the week. Softer-than-expected inflation data helped ease stagflation concerns, providing some relief to investors and reinforcing expectations of policy flexibility from the Federal Reserve. However, trade tensions continued to cast a shadow over market sentiment, with new US tariffs on steel and aluminium triggering swift retaliatory measures from Canada and the European Union. While the S&P 500 and Nasdaq managed to finish higher, the Dow Jones remained under pressure, weighed down by recession fears and ongoing trade policy uncertainty. Meanwhile, European stocks advanced despite escalating tariffs, and Asian markets ended mixed, reflecting broader global uncertainty.