NEW YORK (AP) — U.S. stock indexes are holding near their records on Tuesday following the latest update on inflation, one that could keep the door open for the Federal Reserve to cut interest rates further later this year.
The S&P 500 ticked up by 0.1% in early trading, coming off its latest all-time high. The Dow Jones Industrial Average was down 90 points, or 0.2%, as of 9:35 a.m. Eastern time, and the Nasdaq composite was 0.2% higher.
Yields also eased in the bond market after the inflation data strengthened expectations that the Fed may be able to cut its main interest rate at least twice in 2026 to shore up the job market. Traders still see little chance of a move at the Fed’s next meeting later this month, even if Tuesday’s inflation report raised the probability of a cut slightly to 5%, according to data from CME Group.
Lower interest rates could make borrowing cheaper for U.S. households and boost prices for investments, but it could also worsen inflation at the same time. Tuesday’s report showed that U.S. consumers paid prices last month for gasoline, food and other costs of living that were 2.7% higher overall than a year earlier. That’s a touch higher than economists expected and above the Fed’s 2% target for inflation.
But, more encouragingly, an important underlying trend of inflation wasn’t as bad last month as economists expected. That could give the Fed more leeway to lower interest rates later.
“We’ve seen this movie before—inflation isn’t reheating, but it remains above target,” according to Ellen Zentner, chief economic strategist for Morgan Stanley Wealth Management.
The data helped the yield on the 10-year Treasury ease to 4.16% from 4.19% late Monday. The two-year Treasury yield, which more closely tracks expectations for what the Fed will do, inched down to 3.52% from 3.54%.
Also helping to keep Wall Street relatively quiet were mixed profit reports from big U.S. companies. They’ll need to deliver strong growth to justify the record-breaking runs for their stock prices, and analysts expect companies in the S&P 500 to deliver earnings per share that are 8.3% higher than a year earlier, according to FactSet.
JPMorgan Chase helped kick off the latest reporting season by delivering weaker profit and revenue for the end of 2025 than analysts expected, but that may have been because some were not expecting the bank to take a one-time hit to its earnings due to its purchase of the Apple Card credit card portfolio.
CEO Jamie Dimon sounded relatively optimistic about the U.S. economy, saying “consumers continue to spend, and businesses generally remain healthy.” Its stock slipped 0.6%.
Delta Air Lines, meanwhile, lost 0.5% despite reporting a stronger profit for the end of 2025 than analysts expected. Its revenue came up short of Wall Street’s expectations, as did the midpoint of its forecasted range for profit in 2026.
On the winning side of Wall Street was L3Harris, which rose 3.6%. The defense company said it’s planning to break off its missile business into a separate company later this year through an initial public offering. As part of the plan, the U.S. government agreed to invest $1 billion in the Missile Solutions business, which will convert into common stock following the IPO.
L3 Harris will keep a controlling interest in the missile business following the IPO.
In stock markets abroad, indexes were mixed in Europe and Asia.
Japan’s Nikkei 225 soared 3.1% for one of the world’s biggest moves and set a record, thanks in part to gains for technology-related stocks
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AP Business Writers Chan Ho-him and Matt Ott contributed.