NEW YORK (AP) — U.S. stocks had one of their best days of the year Tuesday after the first of several highly anticipated economic reports arrived this week. better than expected.

The S&P 500 rose 1.7 percent, hitting its third-best day of 2024, after the U.S. government reported that wholesale inflation fell more than economists expected last month. The Dow Jones Industrial Average rose 408 points, or 1 percent, and the Nasdaq Composite climbed 2.3 percent.

High inflation was the Plague of buyers and financial markets for years. It finally seems to be slow enough to get the Federal Reserve reduce high interest rateswhich the Fed economically damaging levels to curb inflation.

US Treasury yields fell following the release of inflation data on the bond market, as traders remain convinced that next month’s Fed meeting will provide the first Reduction in interest rates since the COVID crash in 2020. The 10-year Treasury yield fell to 3.84% from 3.91% late Monday.

However, not everything is clear. On Wednesday, the US government will provide the latest monthly update on the inflation felt by US consumers, and that could be less encouraging. And on Thursday, a report will be released showing how much US shoppers Retail spending.

There is growing concern on Wall Street that the Fed may have kept interest rates too high for too long and undermined the U.S. economy by making borrowing so expensive. The economy is still growing and many economists are not expecting a recession, but a sharp decline in hiring rates in the US The last month raised questions about his strength.

Such questions are so serious because even interest rate cuts in the event of a recession would not have been enough to cause stock prices to rise significantly in the following 18 months, says Chris Haverland, global equity strategist at the Wells Fargo Investment Institute.

Home Depot delivered higher-than-analysts-expected spring-quarter profit on Tuesday, but said high interest rates and economic uncertainty are discouraging some customers from spending money on home improvement projects.

The retail giant cut its full-year forecasts for key sales and profit metrics despite beating expectations for the second quarter. Its shares rose 1.2 percent after previously fluctuating between modest gains and losses.

Elsewhere on Wall Street, Starbucks shares rose 24.5% after it convinced Brian Niccol to leave his job as CEO of Chipotle Mexican Grill to take over the coffee chain. He will start next month as chairman and CEO, replacing Laxman Narasimhan, who is stepping down immediately.

Chipotle, meanwhile, lost 7.5%. Niccol has been CEO since 2018 and chairman since 2020 and has contributed its share price rise more than 240% for the five years through Monday. That beats the 96% return of the S&P 500 including dividends. Chipotle said its chief operating officer, Scott Boatwright, will be its interim CEO.

On foreign stock markets, indices in large parts of Europe and Asia were slightly up. The Japanese Nikkei 225 was an outlier, rising by 3.4 percent.

The Japanese market has been extremely volatile recently, including the worst decline in the Nikkei 225 since Black Monday crash of 1987It has been fluctuating since an interest rate hike by the Bank of Japan forced many hedge funds and other investors to a popular trade where they had borrowed Japanese yen on favorable terms to invest elsewhere. The forced sales that followed the rise in the Japanese yen echoed around the world.

But a promise by a senior Bank of Japan official last week not to raise interest rates further while markets remain “unstable” has helped calm the market.

Another concern that has made Wall Street so shaky over the last month is the fear that investors will Mania about artificial intelligence and pushed up the prices of shares of Big Tech and AI companies too much.

NVIDIAthe company whose chips are driving much of the transition to artificial intelligence was at the center of the action. After rising by over 170% in the first six and a half months of the year, the stock plunged by over 20% in the following three weeks.

On Tuesday, Nvidia rose 6.5% and was the strongest force driving the S&P 500 higher. All other stocks in the small group known as the “Magnificent Seven” Stock markets also rose. They almost single-handedly drove the S&P 500 to dozens of all-time highs at the beginning of the year, even though high interest rates weighed on much of the rest of the stock market.

Unlike at the beginning of this year, it wasn’t just the “Magnificent Seven” that experienced an upswing on Tuesday. The Wall Street rally was broader, with almost 85 percent of the stocks in the S&P 500 gaining. The smaller stocks in the Russell 2000 Index also climbed by 1.6 percent.

Overall, the S&P 500 rose 90.04 points to 5,434.43. The Dow rose 408.63 to 39,765.64 and the Nasdaq Composite rose 407.00 to 17,187.61.

___

AP business writer Yuri Kageyama contributed.