US STOCKS-S&P 500, Nasdaq gain on cooling inflation; tariffs stoke slowdown fears

By Johann M Cherian and Pranav Kashyap

March 12 (Reuters) - The benchmark S&P 500 and the Nasdaq rose on Wednesday following data that showed slowing U.S. inflation, although concerns about the economic fallout of President Donald Trump's trade policies persisted.

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.

Rate-sensitive banks such as Well Fargo WFC.N and Goldman Sachs GS.N, gained 1.9% and 1.1%, respectively, with growth stocks also rising. Tesla TSLA.O surged 6.6% and Nvidia NVDA.O climbed 5.8%, lifting the broader chips index .SOX by 2.7%.

Trump's 25% protectionist tariffs on all steel and aluminum imports kicked in on Wednesday and are likely to include Copper . The U.S. president's trade restrictions drew swift retaliation from Canada and the European Commission.

Companies that integrate steel and aluminum within their supply chains, such as Ford F.N and General Motors GM.N, fell 1.7% each, while Honeywell HON.N dropped 1.4% and Deere D.N declined 1.5%.

At 09:59 a.m. ET the Dow Jones Industrial Average .DJI fell 105.04 points, or 0.25%, to 41,328.44, the S&P 500 .SPX gained 30.39 points, or 0.55%, to 5,602.46, and the Nasdaq Composite .IXIC gained 227.53 points, or 1.30%, to 17,663.62.

Technology stocks .SPLRCT led sectoral gains with a 1.9% rise, rebounding from sharp declines in the previous two sessions.

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. tariffs could stoke domestic inflation and possibly trigger a recession.

The tech-heavy Nasdaq .IXIC recently entered correction territory, while the S&P 500 .SPX narrowly avoided confirming a 10% drop from its February high in the last session.

The uncertainty has prompted businesses to dial back on investments and revise their forecasts downward. Delta DAL.N, Kohl's KSS.N and Walmart WMT.N are among the latest companies to announce forecast adjustments.

Goldman Sachs became the first brokerage to lower its 2025-end target for the benchmark index, while J.P.Morgan sees an increased chance of the U.S. economy entering a recession.

Intel INTC.O jumped 6% after a report said TSMC 2330.TW had pitched Nvidia, Advanced Micro Devices and Broadcom about taking a stake in a joint venture to operate the U.S. chip company's factories.

PepsiCo PEP.N fell 2.1% after brokerage Jefferies downgraded its rating on the stock.

A debate on the stopgap bill in the U.S. Senate was also in focus.

Advancing issues outnumbered decliners by a 1.31-to-1 ratio on the NYSE, and by a 1.37-to-1 ratio on the Nasdaq.

The S&P 500 posted no new 52-week highs and 11 new lows, while the Nasdaq Composite recorded 13 new highs and 90 new lows.