U.S. stocks were mixed Tuesday morning, at the opening bell, following the release of April’s Consumer Price Index (CPI), which came in slightly cooler than expected and offered investors a modest dose of reassurance about inflation’s trajectory. While the DOW Jones Industrial Average slipped, the NASDAQ and S&P 500 managed modest gains as markets priced in continued hope for rate cuts later this year.

As of 9:30 a.m. ET, the DOW dropped 191.18 points, or 0.45%, to 42,218.9. Meanwhile, the NASDAQ climbed 81.01 points, or 0.43%, to 18,789.4, and the S&P 500 rose 4.32 points, or 0.07%, to 5,848.51.

The early movements in equities were largely in reaction to the April CPI report, which showed a 0.2% month-over-month increase in headline inflation—slightly below economists’ consensus expectations of 0.3%. Core CPI, which excludes food and energy, also rose 0.2%, matching March’s reading and indicating a mild cooling in price pressures.

On a year-over-year basis, headline CPI decelerated to 2.3% from 2.4% in March, marking its lowest 12-month increase since February 2021. Core inflation, however, remained firm at 2.8% annually.

The data gave equity markets some breathing room, with futures rising prior to the open as traders maintained bets that the Federal Reserve might implement two interest rate cuts before year-end, with the first potentially arriving in September.

This report helps calm some nerves while the data bolsters the case for those advocating a dovish policy shift, however one benign data point won’t change the Fed’s trajectory just yet.

Investors found further encouragement in falling grocery prices, which dropped 0.4% in April—marking the largest decline since September 2020. The drop was led by a 12.7% plunge in egg prices and declines across key staples including meats, fruits, cereals, and dairy. In contrast, restaurant prices climbed 0.4%, pointing to persistent demand in the services sector.

Shelter inflation, however, continued to weigh on the overall picture. Shelter costs rose 0.3% for the month and remain up 4.0% over the past year, with both rent and owners’ equivalent rent maintaining upward momentum. Despite real-time indicators showing deceleration in rent growth, shelter remains the “stickiest and most persistent component of inflation,” the report noted.

Meanwhile, energy prices provided a mixed bag. After a sharp decline in March, energy rose 0.7% in April, with natural gas up 3.7% and electricity climbing 0.8%. Gasoline was flat on a seasonally adjusted basis but rose 2.9% unadjusted—hinting at potential upward pressure in the coming months.

Other categories offered mixed inflation signals. Medical care services rose 0.5%, while motor vehicle insurance and household furnishings each saw noticeable price increases. At the same time, airline fares continued to fall, down 2.8%, and used car prices slipped 0.5%, pointing to subdued demand in discretionary categories.

The inflation report arrives as markets remain alert to the potential ripple effects of recently implemented tariffs. While April’s CPI has yet to show a broad-based impact from these policy changes, analysts warn that core goods inflation may accelerate in future prints as supply chain pass-throughs become more visible.

For now, markets appear to be taking a cautiously optimistic view. The softening in inflation—however slight—provides a window of opportunity for equities to continue climbing, though more data will be needed to confirm a sustained downward trend.