CNBC Daily Open: Tame inflation in April banishes stagflation threat for now

The U.S. Federal Reserve at its May 7 meeting warned that America is facing an increased risk of stagflation — a scenario in which the economy slows or contracts while inflation shoots up — because of hefty tariffs imposed by President Donald Trump from April 2.

Inflation data released Tuesday, however, showed that prices haven’t grown hotter yet. In fact, the annual reading came in lower than expected, and the core figure, which excludes volatile food and energy prices, was also less than forecast for the month.

Admittedly, the data only captures a month after Trump tariffs were introduced. The rush of imports in the beginning of the year — which was a big part of why U.S. gross domestic product fell in the first quarter — could have dampened price increases. Businesses might have also been swallowing the taxes.

But with the pause of “reciprocal” tariffs, a trade deal with the U.K. and an agreement with China to temporarily slash three-digit duties — all of which will suppress price hikes and keep the American consumer, the bedrock of the U.S. economy, happy — the threat of stagflation seems to be diminished for now.

Lowest annual inflation since 2021
The U.S. consumer price index rose a seasonally adjusted 0.2% in April, putting the 12-month inflation rate at 2.3%, its lowest since February 2021, the Bureau of Labor Statistics said. Annual inflation was lower than the expected 2.4%. Core CPI also increased 0.2% for the month, while the year-over-year level was 2.8%. The forecast was for 0.3% and 2.8%, respectively.

The S&P 500 is positive for the year
On Tuesday, the S&P 500 rose 0.72%, putting it around 0.1% in the green for 2025. The Nasdaq Composite added 1.61%, lifted by Nvidia’s 5.6% jump on news that the company is sending 18,000 advanced chips to Saudi Arabia. However, the Dow Jones Industrial Average shed 0.64% after a nearly 18% drop in shares of UnitedHealth pressured the benchmark. The pan-European Stoxx 600 ticked up 0.12%.

Trump lifts sanctions on Syria
U.S. President Donald Trump is in Saudi Arabia for the first diplomatic trip of his second term. At the U.S.-Saudi Investment Forum in Riyadh on Tuesday, Trump announced he will remove all sanctions on Syria. The country has been designated by the U.S. as a state sponsor of terrorism since 1979. Trump also announced at the same event that Saudi Arabia will be investing $600 billion in the U.S. in a series of deals.

Microsoft is cutting 3% of its employees
Microsoft on Tuesday said that it’s laying off 3% of employees across all levels, teams and geographies, affecting about 6,000 people. One objective is to reduce layers of management, a Microsoft spokesperson said in a statement to CNBC. The company reported better-than-expected results in late April, with $25.8 billion in quarterly net income, and an upbeat forecast.

Shares of Coinbase jump
Coinbase shares soared 24%, their sharpest rally since Nov. 6, the day after Trump’s election victory. On Monday, S&P Global said in a release late Monday that Coinbase will replace Discover Financial Services in the S&P 500 before trading on May 19. Stocks added to the S&P 500 often rise in value because funds that track the benchmark will add it to their portfolios.

[PRO] UBS Wealth downgrades U.S. stocks
Despite the recent rally in the S&P because of promising signs that trade deals are being forged between the U.S. and its trading partners, UBS Wealth on Tuesday downgraded U.S. stocks, even as others on Wall Street are lifting their 2025 forecast for the S&P.

GM unveils new ‘groundbreaking’ EV battery tech, aims to be first to market

General Motors expects to pioneer a new “groundbreaking” EV battery technology that the automaker says will reduce costs and boost profitability of its largest electric SUVs and trucks.

GM is targeting the new batteries and chemistry inside them — called lithium manganese-rich prismatic battery cells — to be used in full-size electric vehicles such as its Chevrolet Silverado and Escalade IQ beginning in 2028.

The new batteries use more-prevalent, less-expensive minerals like manganese instead of larger amounts of cobalt and nickel that are currently used in EV batteries from GM and other automakers.

GM’s first-to-market expectations come after crosstown rival Ford Motor earlier this month announced its intention to launch what it similarly called “game-changing” LMR batteries before 2030.