It’s Friday eve! Today we’re covering how new inflation data impacts the Fed’s next move, a bullish technical signal in the S&P 500, and more. First time reading? Join 190,000 self-directed investors gaining an edge every morning. Sign up here. 

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Inflation is cooling

Inflation and gas prices — two of the biggest pain points for American consumers — just hit their lowest levels in nearly four years. 

But don’t expect the Federal Reserve to change course just yet.

The Bureau of Labor Statistics reported Wednesday that consumer prices cooled in February to 2.8% year-over-year, below forecasts for 2.9%. The core measure, which strips out food and energy costs, also surprised to the downside at 3.1%. 

Gas prices, as mentioned, slid to a multi-year low, according to GasBuddy data.

Encouraging as this may be — the S&P 500 finished in the green on Wednesday — policymakers don’t pivot on a single data dump.

The broader, stickier trend tells the tale, and lingering uncertainties (ahem, tariffs) loom large for the Fed and investors.

“This may help to soften the tone on inflation on the margin, but markets have already aggressively re-priced over the last couple of weeks,” said Michael Reinking, senior markets strategist at the New York Stock Exchange. 

Traders still see virtually no chance of a rate cut at next week’s central bank meeting, according to CME data. However, the probability of no cut in May surged from 61.1% Tuesday to 82% on Wednesday. 

For June, the odds of a rate cut jumped from 55.0% to 68.8%.

Indeed, core and headline inflation remain above the Fed’s 2% target, and some economists caution that the effects of tariffs could take months to materialize in consumer prices. 

“Today’s inflation report might appear to further open the door for future Fed easing, but lower airline fares, a volatile component, largely drove the better-than-expected results,” said Ronald Temple, chief market strategist at Lazard.

He noted that importers have front-loaded purchases to delay the impact of higher duties, meaning tariffs’ full impact have yet to emerge. 

“I would caution investors to curb their enthusiasm as the cumulative future impact of tariffs continues to build,” he added.

Investors, then, are left trying to square two opposing forces just like last year: A Fed that remains resolute in its patient approach, and a market — and a president — that increasingly sees an economic landscape tilting toward looser policy. 

As welcome a sight as cooling inflation is, it’s still premature to expect the Fed to break character in an economic script that’s still being written.

Market snapshot:

Elsewhere:

🚢 Tariffs continue to heat up. President Trump’s 25% tariff on imports of steel and aluminum from all countries took effect Wednesday. The White House has threatened to raise that to 50% for Canadian imports, but reconsidered after Canada halted a new tax on US-bound electricity. The EU also announced counter-tariffs on $28 billion of US goods. (Yahoo Finance)

🖥️ The US Federal Trade Commission keeps investigating Microsoft. The antitrust probe was opened in the final days of the Biden Administration, and the new team will continue scrutiny. The FTC sent Microsoft a so-called civil investigative demand — similar to a subpoena — related to AI at the end of 2024. (Bloomberg)

📊 A technical “buy” signal just flashed in the S&P 500. The Relative Strength Index tracks the magnitude and persistence of price movements, and it just crossed a key threshold that historically has been a bullish indicator. The last time this technical signal flashed was October 2023. (Sherwood Media)

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Rapid-fire:

• President Trump will pick Fed governor Michelle Bowman to serve as the central bank’s vice chair for bank supervision (WSJ)

• Adobe stock ticked higher after beating first-quarter revenue estimates (Yahoo Finance)

• Shares of the Roomba maker iRobot tanked more than 35% after it raised concerns about its ability to stay in business (Reuters)

• Intel stock rallied after hours after naming a new CEO (WSJ)

• Quantum computing stocks surged Wednesday after the company D-Wave claimed to have had a breakthrough (Investopedia)

• A Bank of America analyst says Nvidia is trading at a “compelling price” (TipRanks)

• The US budget deficit totaled just over $307 billion in the last month (CNBC)

• The S&P 500 has been effectively flat for 6 months (Pomp Letter)

Last thing:

About me:

📰 I’m Phil Rosen, co-founder and editor-in-chief of Opening Bell Daily. I’ve published books, lived on three continents, and won awards for my journalism, which has appeared in Business Insider, Fortune, Yahoo Finance, Bloomberg and Inc. Magazine.

I write our flagship newsletter to prepare you for each trading day, unpacking markets, economic data and Wall Street with analysis you won’t find anywhere else. Feedback? Reply directly to this email, ping me on X @philrosenn, or write me [email protected].