After a spectacular risk-on rally on Wednesday, Wall Street sharply pulled back during Thursday’s trading, as investors digested the 90-day tariff pause and weighed lingering economic risks to the outlook.
Even a sharply lower-than-expected inflation report did little to support risk sentiment — a testament to how susceptible investors remain to economic uncertainty.
The Consumer Price Index fell from 2.8% year-over-year in February to 2.4% in March, below expectations of 2.6% and marking the lowest reading since September 2024. On a monthly basis, inflation was negative by 0.1% — the first decline since May 2020.
While the data bolstered the case for near-term Fed rate cuts — markets are pricing in an 88% chance of a 0.25% move by June — traders remained cautious amid the ongoing tariff drama.
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The S&P 500 dropped 4.8% by midday in New York, erasing about half of Wednesday’s historic gains, which had marked the index’s strongest rally since 2008. The Nasdaq 100 tumbled 5.4%, while small caps in the Russell 2000 sank 5.3%.
Despite the pullback in equities, traditional safe havens like Treasuries and the dollar …