By Johann M Cherian and Pranav Kashyap
(Reuters) - Wall Street’s main indexes witnessed choppy trading on Wednesday amid concerns about the economic implications of an escalating global trade war, which eclipsed data showing U.S. inflation cooled in February.
A labor department report showed consumer prices increased less than expected in February, but the improvement is likely to be temporary, given the backdrop of aggressive import tariffs.
"This (CPI) is good news on the inflation front but obviously, with the imposition of tariffs, we still don’t know where the real direction of inflation is at this time," said Peter Cardillo, chief market economist at Spartan Capital Securities.
Traders held on to bets that the Federal Reserve will proceed with a 25-basis-point interest-rate cut in June, according to data compiled by LSEG. The central bank is widely expected to maintain current borrowing rates at its meeting next week.
Investors did not rush back into riskier assets, with the largely unchanged Treasury yields reflecting the prevalent caution. [US/]
Trump’s 25% protectionist tariffs on all steel and aluminum imports, which are likely to extend to copper, took effect and drew swift retaliation from Canada and the European Commission.
Ford and General Motors (NYSE:GM) lost 1.5% and 1.3%, respectively, while an index tracking airlines lost 4.3%.
Steel and aluminum stocks bucked the downward trend. Cleveland Cliffs (NYSE:CLF) rose 8% and Alcoa (NYSE:AA) added 2.5%.
At 11:39 a.m. ET the Dow Jones Industrial Average fell 198.26 points, or 0.48%, to 41,235.22, the S&P 500 gained 14.74 points, or 0.26%, to 5,586.81, and the Nasdaq Composite gained 157.59 points, or 0.90%, to 17,594.35.
Consumer staples, among the best performers of the year so far, fell 1.8%, weighed by a 7% slide in Brown-Forman. Trade associations said retaliatory EU tariffs on the U.S. would be "devastating" for the liquor industry.
Technology stocks, among the top decliners so far in 2025, rebounded with a 1.4% rise.
Financial markets have been roiled by Trump’s unpredictable tariff maneuvers, with analysts cautioning about potential capital outflows from Wall Street. Concerns are mounting that the new U.S. levies could stoke domestic inflation and possibly trigger a recession.
The tech-heavy Nasdaq recently entered correction territory, while the S&P 500 narrowly avoided confirming a 10% drop in the last session from its February high.
The uncertainty has prompted businesses to dial back investments and slash their forecasts.
Goldman Sachs (NYSE:GS) lowered its 2025-end target for the benchmark index, while J.P.Morgan sees higher chances of a recession.
Intel (NASDAQ:INTC) jumped 3% after a report said TSMC had pitched Nvidia, Advanced Micro Devices (NASDAQ:AMD) and Broadcom (NASDAQ:AVGO) about taking a stake in a joint venture to operate the U.S. chip company’s factories.
The broader chips index rose 2.5%, aiding gains on the tech-laden Nasdaq.
PepsiCo (NASDAQ:PEP) fell 3% after brokerage Jefferies downgraded its rating on the stock.
Declining issues outnumbered advancers by a 1.26-to-1 ratio on the NYSE, and by a 1.08-to-1 ratio on the Nasdaq.
The S&P 500 posted no new 52-week highs and 17 new lows, while the Nasdaq Composite recorded 16 new highs and 150 new lows.