Most U.S. stocks slump, but Nvidia nudges Nasdaq to another record

Trader Vincent Napolitano works on the floor of the New York Stock Exchange, Friday, May 9, 2025. (AP Photo/Richard Drew)

NEW YORK — Most U.S. stocks slumped on Tuesday after the latest update on inflation hurt Wall Street’s hopes for lower interest rates.

The S&P 500 fell 0.4 per cent, though it’s still near its all-time high set last week, as 90 per cent of the stocks within the index fell. The Dow Jones Industrial Average dropped 436 points, or one per cent.

Tech stocks were an outlier, though, and the Nasdaq composite rose 0.2 per cent to set another record thanks to Nvidia, the market’s most influential stock.

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Stocks felt pressure from a report showing inflation in the United States accelerated to 2.7 per cent last month from 2.4 per cent in May. Economists pointed to increases in prices for clothes, toys and other things that tend to get imported from other countries. Their prices could be rising because of the tariffs that President Donald Trump has proposed on countries worldwide in hopes of getting them to open their markets further to U.S. products.

“Inflation has begun to show the first signs of tariff pass-through,” according to Ellen Zentner, chief economic strategist for Morgan Stanley Wealth Management.

To be sure, the inflation rate reported on Tuesday morning wasn’t far from what economists expected. And an underlying measure of inflation that economists think is a better predictor of future trends accelerated by less than feared.

Altogether, the data helped cause Treasury yields to yo-yo a few times in the bond market before they began rising.

The yield on the 10-year Treasury climbed to 4.48 per cent from 4.43 per cent late Monday. The yield on the two-year Treasury, which more closely tracks expectations for what the Federal Reserve will do with short-term interest rates, rose to 3.95 per cent from 3.90 per cent.

A further acceleration in inflation could tie the hands of the Fed, which has been keeping interest rates on hold this year after cutting them at the end of last year. That’s because lower rates can give inflation more fuel, along with a boost for the economy. Wall Street loves lower rates because they goose prices higher for stocks and other investments, and Trump himself has been clamoring for the Fed to cut more quickly.

Fed Chair Jerome Powell, though, has been adamant that he wants to wait for more data about how tariffs affect the economy and inflation. Following Tuesday’s inflation report, traders are still overwhelmingly betting that the Fed will cut its main interest rate by the end of the year. But they pulled back their bets on the number of potential cuts, according to data from CME Group.

No one knows for sure if Trump will follow through on the stiff tariffs he’s proposed, or if he’ll flinch and back down if the economy and financial markets show too much pain. The hope is that he’ll reach trade deals with other countries beforehand that will lower the sky-high tariff rates that Trump has proposed.

Trump on Tuesday said he struck a deal with Indonesia, where it committed to buying energy, agricultural products and planes from the United States. Trump also said imports from Indonesia, which is the world’s fourth-largest country by population, would face a tariff of 19 per cent instead of the 32 per cent that he had threatened earlier.

On Wall Street, tech stocks were the outliers and rose after Nvidia said the U.S. government assured it that licenses will be granted for its H20 chip again and that deliveries will hopefully begin soon. Nvidia’s 4 per cent gain was by far the strongest force pushing upward on the S&P 500.

Earlier this year, Nvidia said that U.S. restrictions on the chips used in artificial-intelligence development chiseled billions of dollars off its results for the first quarter of the year.

Stocks of big U.S. banks, meanwhile, were mixed following their latest profit reports.

JPMorgan Chase slipped 0.7 per cent despite reporting a stronger profit than analysts expected, as CEO Jamie Dimon warned of risks to the economy because of tariffs and other concerns.

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Citigroup rose 3.7 per cent following its better-than-expected profit report. But Wells Fargo fell 5.5 per cent following its own, as it trimmed its forecast for an important way that it makes money.

All told, the S&P 500 fell 24.80 points to 6,243.76. The Dow Jones Industrial Average dropped 436.36 to 44,023.29, and the Nasdaq composite rose 37.47 to 20,677.80.

In stock markets abroad, indexes slipped in Europe after a mixed session in Asia. Indexes rose 1.6 per cent in Hong Kong but fell 0.4 per cent in Shanghai after a report said China’s economic growth slowed only slightly last quarter despite pressure from Trump’s tariffs.

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Stan Choe, The Associated Press

AP Business Writer Yuri Kageyama contributed.