The stock market opened higher on Tuesday, even after consumer prices spiked 8.5% in the 12 months ending in March, as some investors hope that inflation is showing signs of moderating, with core inflation—excluding volatile food and energy prices—coming in lower than expected.
Stocks opened higher before turning negative later in the day: The Dow Jones Industrial Average fell 0.1%, nearly 100 points, while the S&P 500 lost 0.3% and the tech-heavy Nasdaq Composite 0.3%.
Consumer prices for March increased 1.2% from last month and 8.5% annually, according to data released Tuesday by the Labor Department, rising at the fastest pace in four decades.
While the overall inflation number was red-hot, markets got a boost from core inflation, which excludes volatile food and gas costs, rising just 0.3% in March—a smaller increase than last month and lower than what economists were expecting.
Some investors are betting that the lower core consumer price reading could mean inflation is showing signs of peaking, especially after prices also fell in several other recently spiking categories, such as used cars.
Gas and food prices were among the largest drivers of higher prices in March, with gas prices spiking over 18%—driven by Russia’s invasion of Ukraine—and accounting for over half of the monthly increase.
Government bond yields, which surged higher a day earlier, retreated slightly on Tuesday, helping boost stocks—though the benchmark ten-year Treasury note remains above 2.7%, its highest level since January 2019.