Wall Street rises after encouraging inflation data, but the trade war keeps knocking stocks around

NEW YORK (AP) — U.S. stock indexes rose Wednesday after Wall Street got some relief from an encouraging inflation update. But even on a rare up day for the market, President Donald Trump's trade war still knocked stocks around.

The S&P 500 gained 0.5% after skidding between an early gain of 1.3% and a later loss. The unsettled trading came a day after the index briefly fell more than 10% below its all-time high set last month.

The Dow Jones Industrial Average also pinballed sharply, careening between a rise of 287 points and a drop of 423. It ended with a loss of 82 points, or 0.2%, while the Nasdaq composite climbed 1.2%.

The inflation report, which showed overall prices rose less for U.S. consumers last month than economists expected, helped companies in the artificial-intelligence industry lead the way. It's a bounce back after AI stocks got crushed recently by worries their prices had gone too stratospheric in the market's run to record after record in recent years.

Nvidia climbed 6.4% to trim its loss for the year so far to 13.8%. Server-maker Super Micro Computer rose 4%, and GE Vernova, which is helping to power AI data centers, gained 5.1%.

Elon Musk's Tesla, whose price had more than halved since mid-December, rallied 7.6% for its first back-to-back gain in nearly a month.

Even with such gains, though, more stocks in the S&P 500 fell than rose. Among the hardest hit were businesses that could be set to feel pain because of Trump's trade war.

Brown-Forman, the company behind Jack Daniel’s whiskey, tumbled 5.1%, and Harley-Davidson sank 5.7%.

U.S. bourbon and motorcycles are just two of the products the European Union is targeting with its own tariffs announced on U.S. products. The moves were in response to Trump's 25% tariffs on steel and aluminum that kicked in earlier in the day.

Canada also hit back with tariffs announced on U.S. tools, sports equipment and other products.

“We deeply regret this measure,” European Union President Ursula von der Leyen said. “Tariffs are taxes. They are bad for business, and worse for consumers.”

The question hanging over Wall Street is how much pain Trump will let the economy endure through tariffs and other policies. He's said he wants manufacturing jobs back in the United States, along with a smaller U.S. government workforce, more deportations and other things.

Even if Trump ultimately goes with milder tariffs, damage could still be done. The dizzying barrage of on -again, off -again announcements on tariffs has already begun sapping confidence among U.S. consumers and businesses by ramping up uncertainty. That could cause U.S. households and businesses to pull back on spending, which would hurt the economy.

On Tuesday, for example, Trump said he would double tariffs announced on Canadian steel and aluminum, only to walk it back later in the day after a Canadian province pledged to drop a retaliatory measure that had incensed Trump.

Several U.S. businesses have said they've already begun seeing a change in behavior among their customers.

Delta Air Lines sank 3% to compound its drop of 7.3% from the prior day, when the carrier said it’s seeing demand weaken for close-in bookings for its flights.

Casey’s General Stores, the Ankeny, Iowa-based company that runs nearly 2,900 convenience stores in 20 states, offered some encouragement. It reported stronger profit and revenue for the latest quarter than analysts expected thanks in part to strength for sales of hot sandwiches and fuel. It also kept steady its forecast for upcoming revenue this year.

Casey’s stock rose 6.2%.

All told, the S&P 500 rose 27.23 points to 5,599.30. The Dow Jones Industrial Average fell 82.55 to 41,350.93, and the Nasdaq composite jumped 212.35 to 17,648.45.

In stock markets abroad, indexes rose across much of Europe following mixed sessions in Asia.

In the bond market, Treasury yields edged up to regain more of their losses from recent months sparked by worries about the U.S. economy’s strength. The 10-year Treasury rose to 4.31% from 4.28% late Tuesday and from 4.16% at the start of last week.

Wednesday’s better-than-expected inflation report gave some encouragement when worries are high that Trump’s tariffs could drive prices even higher for U.S. households after U.S. importers pass on the costs to their customers.

It's also helpful for the Federal Reserve, which had been cutting interest rates last year to boost the economy before pausing this year, partly because of concerns about stubbornly high inflation.

Worries had been rising about a worst-case scenario for the economy and for the Fed, where economic growth stagnates but inflation remains high. The Fed has no good tool to fix such “stagflation” because lower interest rates can push inflation higher.

“Trends that would suggest a cold economy and hot inflation are still in the early stages, but uncertainty remains high,” according to Phil Segner, senior research analyst at Leuthold.

Or, as Brian Jacobsen, chief economist at Annex Wealth Management, said: “The tariff story is just beginning.”

___

AP Business Writer Yuri Kageyama contributed.