The US stock market is experiencing heightened volatility as investors navigate concerns over the economic impact of President Donald Trump’s tariff policies on major global economies, including China, India, Europe, and Canada.

The tech-heavy NASDAQ Composite index has crashed over 6 per cent in March so far, following a 4 per cent fall in February. The index rose 1.2 per cent on March 12 after suffering a cumulative loss of 4.18 per cent in the previous two consecutive sessions.

The S&P 500 index has plunged 6 per cent in March so far. In the previous month, the index had declined 1.4 per cent. On March 12, the index closed with a gain of 0.49 per cent after falling 3.4 per cent in the last two sessions.

Both indices rose in the previous session on better US consumer inflation data. US inflation eased to 2.8 per cent in February from 3 per cent in January.

Investors and traders wonder whether better-than-expected inflation data can trigger a trend reversal in the US market.

Can the US stock market rebound?

While the recent inflation data provides some relief to the market, it is unlikely to significantly boost sentiment due to prevailing concerns that US President Donald Trump’s tariff policies could drive inflation higher in the coming months.

The impact of the recently announced tariffs on China, Canada, and Mexico is expected to unfold in the months ahead.

After rising on Wednesday, futures indicate the US stock market may decline on Thursday. Dow Jones Futures was down 30 points around 3 PM.

Moreover, the decline in the US Consumer Price Index (CPI) is not significant enough to keep the market out of negative territory.

February CPI at 2.8 per cent is just the lowest since December 2024 when it came at 2.9 per cent. US CPI readings in September, October and November 2024 were 2.4 per cent, 2.6 per cent and 2.7 per cent, respectively.

The US market faces significant challenges ahead, including a major trade war due to Trump’s aggressive tariff policy, a looming recession, and stretched valuations of tech stocks, all of which are likely to weigh on market performance.

“While the recent inflation data gave some respite to the US stock market’s recent selloff, there are still many factors in play that can weigh heavy on US stocks,” said Ross Maxwell, Global Strategy Operations Lead at VT Markets.

While the February inflation data have raised hopes that the US Federal Reserve may move forward with rate cuts, Maxwell observed that any sustained reversal will depend on many other factors currently at play in the market.

“We are yet to see the effects of inflation of tariffs imposed on Mexico, Canada and China,” said Maxwell.

An escalation of the trade war may drive up inflation, leading the US Fed to tighten its monetary policy, which would weigh on the stock market.

“We should keep an eye on Donald Trump and any escalation of tariffs and trade wars, future impacts of tariffs on inflation, as well as a keen eye on the Fed at its meeting on March 18th-19th to determine if it will be something more sustained or just a short term respite for the markets,” said Maxwell.

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