- Indexes: Dow down 0.64%, S&P 500 up 0.72%, Nasdaq up 1.61%
- S&P 500 turns positive YTD for first time in 2 months
- April CPI at 2.3% YoY versus 2.4% estimate
- Coinbase soars after the stock's addition to the S&P 500
- UnitedHealth suspends forecast, CEO steps down, shares tumble
(Reuters) - The S&P 500 and the Nasdaq closed higher on Tuesday for a second straight day after softer-than-expected inflation numbers added to investor optimism from Monday when the U.S. and China announced a trade truce.
The Dow fell, however, with its biggest drag a 17.8% slide in shares of UnitedHealth after the insurance bellwether suspended its annual forecast and its CEO stepped down.
The S&P 500 closed with a year-to-date gain for the first time since late February after data showed that U.S. consumer prices rebounded moderately in April, with headline inflation increasing 0.2% last month compared with economist estimates for a 0.3% increase and a 0.1% drop in March.
The CPI climbed 2.3% in the 12 months through April, after advancing 2.4% in the 12-month period until March.
"The sustainability of the carry-through from yesterday is positive. There was nothing in CPI to throw it off," said Carol Schleif, chief market strategist at BMO Private Wealth in Minneapolis.
Schleif described Monday's improvement in U.S. and China trade relations as going "from iceberg to 80 degrees spring day overnight" and said the 90-day pause on tariffs came in time for retailers to import goods to build up stocks for back-to-school and year-end holiday shopping.
Monday's relief rally followed Washington and Beijing's agreement to dial back stringent reciprocal tariffs, signaling a joint effort to stave off a global economic downturn.
The U.S. will temporarily lower the extra tariffs it imposed on Chinese imports to 30% from 145% for three months, while Chinese duties on U.S. imports will fall to 10% from 125% in the same period.
After the tariff truce, multiple brokerages lowered their odds of a U.S. recession.
Traders leaned in to bets that the U.S. Federal Reserve would hold off on lowering interest rates until September, while still anticipating two 25-basis-point cuts by year-end.
After Tuesday's inflation reading and Monday's U.S.-China trade detente, R. Burns McKinney, portfolio manager at NFJ Investment Group in Dallas, said, "It does give the Fed the ability to focus on the labor side of this dual mandate in the coming meetings."
"If we don't see resurgent inflation and we get a little bit of certainty in trade policy between now and the end of the year, central bankers will resume their cutting cycle," said McKinney, "not because of economic weakness but because slowing inflation means the inflation-adjusted Fed fund rate is still restrictive, and there's room to lower."
The Dow Jones Industrial Average fell 269.67 points, or 0.64%, to 42,140.43, the S&P 500 gained 42.36 points, or 0.72%, to 5,886.55 and the Nasdaq Composite gained 301.74 points, or 1.61%, to 19,010.09.
Among the S&P 500's 11 major industry sectors, six advanced, with technology the biggest gainer, ending up 2.25% while healthcare was the biggest loser, down 2.97%.
The S&P 500 and the Nasdaq have recovered losses since April 2 - or "Liberation Day" - when U.S. President Donald Trump announced sweeping reciprocal tariffs.
A 90-day pause announced on April 9 for countries other than China, along with solid earnings reports and a limited U.S.-UK trade agreement last week, helped the S&P 500 and the tech-heavy Nasdaq regain lost ground.
Shares of crypto exchange operator Coinbase Global surged almost 24% after an announcement that it is slated to join the S&P 500 on May 19.
With more than 90% of S&P 500 companies having reported earnings, numbers from retail giant Walmart will be on the radar later this week.
Also, a number of Fed officials are scheduled to speak this week, including Chair Jerome Powell on Thursday.
Advancing issues outnumbered decliners by a 1.86-to-1 ratio on the NYSE where there were 189 new highs and 77 new lows.
On the Nasdaq, 2,590 stocks rose and 1,904 fell as advancing issues outnumbered decliners by a 1.36-to-1 ratio. The S&P 500 posted 19 new 52-week highs and 6 new lows while the Nasdaq Composite recorded 75 new highs and 74 new lows.
On U.S. exchanges, 17.81 billion shares changed hands compared with the 16.51 billion moving average for the last 20 sessions.
Reporting by Sinéad Carew in New York and Shashwat Chauhan and Pranav Kashyap in Bengaluru; Editing by Sherry Jacob-Phillips, Pooja Desai and Matthew Lewis
Source: Reuters