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U.S. stocks closed mostly higher on Tuesday, with the S&P 500 bouncing back to positive territory for the year after fresh data hinted at cooling inflation, adding to investor optimism a day after the United States and China reached a trade deal. However, the Dow ended in the red.

How Did The Benchmarks Perform?

The Dow Jones Industrial Average (DJI) slid 0.6% or 269.67 points, to finish at 42,140.43 points, a day after recording its highest close since March 26.

The S&P 500 jumped 0.7% or 42.36 points to close at 5,886.55 points, erasing all its losses for the year and entering positive territory. Consumer discretionary and tech stocks were the biggest gainers.

The Consumer Discretionary Select Sector SPDR (XLY) gained 1.3%, while the Technology Select Sector SPDR (XLK) jumped 2.2%. However, the Healthcare Select Sector SPDR (XLV) fell 3%. Six of the 11 sectors of the benchmark index ended in positive territory.

The tech-heavy Nasdaq rose 1.6% or 301.74 points, to end at 19,010.19 points.

The fear-gauge CBOE Volatility Index (VIX) was down 0.92% to 18.22. Advancers outnumbered decliners on the NYSE by a 1.86-to-1 ratio. On Nasdaq, a 1.36-to-1 ratio favored advancing issues.  A total of 17.81 billion shares were traded on Tuesday, higher than the last 20-session average of 16.51 billion.

Cooling Inflation, Easing Trade Tension Boost Investors’ Confidence

Stocks rallied Monday after the United States and China announced a trade truce. The upbeat sentiment continued on Tuesday, as fresh data hinted at cooling inflation.  The Labor Department said that the consumer price index (CPI) rose 0.2% sequentially in April and 2.3% from year-ago levels, the lowest since February 2021. The monthly reading came in line with expectations, while the 12-month was slightly below the consensus estimate.

Core CPI, which excludes the volatile food and energy prices, also rose 0.2% month over month in April, lower than the forecast of 0.3%. Year over year, core CPI grew 2.8%, which came in line with analysts’ expectations.

The softer-than-expected inflation reading added to the investors’ optimism, fueling the last session’s rally. Tech stocks rallied once again on Tuesday. Shares of NVIDIA Corporation ( NVDA ) jumped 5.6% on news that the chipmaker will send 18,000 of its best AI chips to Saudi Arabia. NVIDIA carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

S&P 500 Erases All Losses for This Year

Tuesday’s gains saw the S&P 500 bounce back into positive territory for the year, just over a month after the index entered correction territory following the announcement of Trump’s Liberation Day tariffs that rattled Wall Street.

However, the Dow was dragged down by UnitedHealth Group Incorporated ( UNH ). The insurance bellwether’s shares plummeted 17.8% after the company suspended its annual forecast and its CEO resigned.

The market rally resumed on Monday after the United States and China agreed to pause tariffs for 90 days over the weekend. The United States said that it will slash tariffs to 30% on Chinese imports from 145%, while China will cut tariffs on U.S imports to 10% from 125%.

Investors believe the Federal Reserve will resume its rate cuts not before September but are hopeful about two 25 basis point rate cuts this year as inflation is cooling steadily and is on track to meet the central bank’s 2% target.

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This article originally published on Zacks Investment Research (zacks.com).

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