Here’s the inflation breakdown for May 2025 — in one chart

Key Takeaways:

• U.S. stocks advanced after May 2025 inflation data showed smaller-than-expected increases.
• The Consumer Price Index rose only 0.1% in May, suggesting tariffs haven’t significantly impacted prices.
• U.S. and Chinese officials reached a preliminary trade agreement pending approval from Presidents Trump and Xi Jinping.
• Tesla shares climbed over 2% after CEO Elon Musk expressed regret over past social media posts about President Trump.
• Quantum computing stocks surged following Nvidia CEO Jensen Huang’s comment that the industry is “reaching an inflection point.”

Stocks Rise Amid Positive Economic Indicators and Trade Developments

U.S. markets experienced a rally on Wednesday as investors reacted positively to encouraging inflation data and signs of progress in U.S.-China trade relations.

Market Gains Across the Board

The Dow Jones Industrial Average advanced 158 points, or 0.4%, reflecting growing investor confidence. The S&P 500 added 0.2%, while the Nasdaq Composite also climbed 0.2%. The S&P 500 has risen in six of the last seven trading days and is now less than 2% below its record high reached in February.

Inflation Slows More Than Expected

The Consumer Price Index (CPI) rose by only 0.1% in May from April, falling short of the 0.2% increase economists polled by Dow Jones had anticipated. Core CPI, which excludes volatile food and energy prices, also increased by just 0.1%.

“Inflation in May was lower than anticipated, suggesting the tariffs aren’t having a large immediate impact because companies have been using existing inventories or slowly adjusting prices due to uncertain demand,” said Alexandra Wilson-Elizondo, global co-CIO of multi-asset solutions at Goldman Sachs Asset Management.

She added, “As we wait for the 90-day tariff pause to pass, the market will be caught between inflation and job prints. If inflation stays under control or the job market weakens, the Federal Reserve will likely consider cutting interest rates down the road.”

Advancements in U.S.-China Trade Talks

A key focus for investors this week has been the discussions between U.S. and Chinese officials. After two days of talks in London, officials announced they had reached a consensus on a trade framework, pending approval from President Donald Trump and President Xi Jinping.

As part of the preliminary agreement, China would approve exports of rare earth minerals to the U.S., while the U.S. would roll back restrictions on the sale of advanced technology to China. Additionally, the U.S. would allow Chinese students to attend American colleges and universities.

President Trump took to Truth Social to announce that the deal with China is “done, subject to final approval with President Xi and me.” He emphasized, “WE ARE GETTING A TOTAL OF 55% TARIFFS, CHINA IS GETTING 10%.”

Despite the progress, Commerce Secretary Howard Lutnick stated on “Money Movers” that U.S. tariffs on Chinese imports would remain at their current levels. When asked if the tariffs would change after the talks in London, Lutnick responded, “You can definitely say that.”

Notable Stock Movements

Tesla Gains Momentum

Shares of Tesla rose more than 2%, marking the electric vehicle maker’s fourth consecutive day of gains. The uptick follows CEO Elon Musk’s public statement expressing regret over some of his social media posts regarding President Trump.

Quantum Computing Stocks Surge

Quantum computing companies saw significant stock increases after Nvidia CEO Jensen Huang remarked that the industry is “reaching an inflection point” during his keynote speech at Nvidia’s GTC Paris developer conference.

Shares of Rigetti Computing and Quantum Computing jumped nearly 20% and 35%, respectively, while IonQ added about 8%. D-Wave Quantum’s stock rose by 1.8%, reflecting heightened investor interest in the burgeoning sector.

Looking Ahead

The combination of easing inflation concerns and potential advancements in trade relations between the U.S. and China has bolstered investor confidence. Market participants will continue to monitor these developments closely, particularly with the pending approval of the trade agreement by the respective presidents.

As Wilson-Elizondo noted, the interplay between inflation data and the job market will be critical in shaping future Federal Reserve policy decisions.