Tesla (NASDAQ: TSLA) stock climbed more than 7% on Wednesday, leading a rally in technology stocks after U.S. inflation data came in below expectations, soothing concerns over escalating tariffs and lifting broader market indices.

The unexpectedly soft inflation figures—showing a 0.2% month-over-month increase in February against a forecasted 0.3%, with the annual rate easing to 2.8%—shifted market sentiment away from fears of aggressive Federal Reserve tightening.

This development, coupled with reduced anxiety over proposed U.S. tariffs, fueled gains across the technology sector, with Tesla, Nvidia Corp., and Meta Platforms Inc. posting significant advances.

CPI Data Signals Relief Amid Tariff Uncertainty

The Bureau of Labor Statistics’ (BLS) CPI report, a closely watched gauge of U.S. price pressures, underscored a cooling inflationary trend that caught markets off guard. Economists surveyed by Bloomberg had anticipated a 0.3% monthly rise, and the shortfall prompted a reassessment of monetary policy expectations.

Annual core CPI, excluding volatile food and energy prices, held steady at 3.2%, further alleviating concerns that inflation could spiral higher amid ongoing tariff debates.

The data arrived against a backdrop of heightened market focus on U.S. trade policy. President Donald Trump’s administration has floated tariffs of 25% on imports from Canada and Mexico and 10% on goods from China, measures Goldman Sachs analysts estimate could lift core U.S. prices by 0.7% if fully enacted.

Tech Stocks Lead Broad Market Gains

The S&P 500 rose 0.5% to close at 5,980.12, while the Nasdaq Composite gained 1.2%, ending the session at 19,245.67, as investors pivoted toward growth-oriented sectors following the CPI report released on March 12.

The S&P 500 and Nasdaq outperformed as investors rotated into technology stocks, a sector sensitive to interest rate expectations and macroeconomic shifts. Tesla’s 7.4% gain—closing at $248.09—outpaced the broader indices, while Nvidia rose 6.4% and Meta advanced 2.1%. The rally marked a reversal from earlier 2025 weakness, when tariff uncertainties and a 38% year-to-date drop had pressured Tesla’s valuation.

Analysts attributed the tech sector’s strength to the CPI data’s implications for monetary policy. Lower inflation reduces the likelihood of sustained high interest rates, a scenario that enhances the present value of future cash flows for growth companies.

According to Dr. Kirill Kretov, Trading Automation Expert at CoinPanel, a lower-than-expected inflation reading typically has a positive impact on riskier assets, including stocks and cryptocurrencies: "A shift toward easing could lower borrowing costs, increase liquidity, and boost investor risk appetite—potentially benefiting Bitcoin" and technology shares.

"However, this bullish outlook comes with caveats: rate cuts depend on economic conditions, and weaker inflation driven by slowing demand may dampen risk-taking," warns Kretov.

Why Is Tesla Stock Surging? A Mix of Macro and Micro Drivers

While the CPI data provided the macroeconomic spark, Tesla’s performance was bolstered by company-specific factors. Morgan Stanley raised its price target on the stock to $250 from $230, citing optimism around Tesla’s planned robotaxi unveiling in mid-2025 and its advancements in artificial intelligence.

BREAKING:

MORGAN STANLEY REITERATES $800 BULL CASE FOR $TSLA IN THE NEXT 12 MONTHS

We are going to Mars! 🚀 pic.twitter.com/6fT4nljDaQ

— Dalton Brewer (@daltybrewer) March 12, 2025

The interplay between macro relief and micro catalysts amplified Tesla’s gains. The company’s global operations, which span manufacturing facilities in China and the U.S., had faced scrutiny over potential tariff-related cost increases. Wednesday’s CPI report suggested that such pressures might not materialize as acutely as feared, supporting Tesla’s cost structure and profitability outlook.

Retail Investors Amplify Tesla Moves

Retail investors, a significant force in Tesla’s shareholder base, contributed to the stock’s momentum. Data from JPMorgan Chase & Co. indicates that individual traders account for roughly 30% of Tesla’s float in 2025, a cohort known for rapid responses to market-moving news.

The stock’s volatility has long attracted retail participation, with Tesla enduring a 38% decline earlier this year before rebounding sharply in recent sessions. Wednesday’s surge rewarded investors who had viewed the dip as a buying opportunity, aligning with a broader trend of retail interest in technology stocks during market upswings.