NEW YORK – U.S. stocks had one of their best days of the year on Tuesday after the first of several economic reports this week came in 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.

Inflation, the plague of consumers and financial markets, appears to be easing sufficiently to prompt the US Federal Reserve to lower the high interest rates that it has kept at an economy-sapping level in order to contain inflation.

US Treasury yields fell following the release of inflation data in the bond market as traders remain convinced that next month’s Fed meeting will bring the first interest rate cut since the Covid-19 crash in 2020. The yield on the 10-year US Treasury note fell to 3.84% from 3.91% late Monday.

However, not everything is clear yet. On Wednesday, the US government will release the latest monthly report on the inflation felt by US consumers. This could be less encouraging. And on Thursday, a report will be released showing how much US shoppers are spending at retail.

There is growing concern on Wall Street that the Fed has kept interest rates too high for too long and weakened the U.S. economy by making credit so expensive. The economy is still growing and many economists do not expect a recession, but a sharp drop in U.S. jobs figures last month raises doubts about its 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.

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, with the Nikkei 225 experiencing its worst drop since the Black Monday crash of 1987. It has been volatile since a rate hike by the Bank of Japan forced many hedge funds and other investors to suddenly abandon a popular trade in which they borrowed Japanese yen at cheap rates to invest elsewhere. The forced selling that followed the Japanese yen’s rise reverberated 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 rocked Wall Street over the past month is the worry that investors have gone too far in their mania for artificial intelligence, driving up the prices of stocks in major technology companies and the AI ​​industry.

Nvidia, the company whose chips are driving much of the shift to artificial intelligence, has been at the center of the development. After rising more than 170% in the first six and a half months of the year, its stock plunged more than 20% in the following three weeks.

On Tuesday, Nvidia rose 6.5 percent, making it the biggest force driving the S&P 500 higher. All other stocks in the small group known as the Magnificent Seven also rose. They almost single-handedly drove the S&P 500 to dozens of all-time highs earlier this year, even as 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.

Information for this article was contributed by Yuri Kageyama of The Associated Press.