NEW YORK (AP) — U.S. stocks are drifting on Wednesday after a report suggested President Donald Trump’s tariffs are not pushing inflation much higher, at least not yet.

The S&P 500 was virtually unchanged in early trading and remains just 1.7% below its all-time high set in February. The Dow Jones Industrial Average was down 46 points, or 0.1%, as of 9:35 a.m. Eastern time, and the Nasdaq composite was 0.2% higher.

The action was a bit stronger in the bond market, where Treasury yields eased after a report showed inflation ticked up by less last month than economists expected. U.S. consumers had to pay prices that were 2.4% higher overall in May than a year earlier. That was up from April’s 2.3% inflation rate, but it wasn’t as bad as the 2.5% that Wall Street was expecting.

A fear has been that Trump’s wide-ranging tariffs could ignite another acceleration in inflation, just when it had seemed to get nearly all the way back to the Federal Reserve’s 2% target from more than 9% at its peak three summers ago.

It hasn’t happened, though economists warn it may take months more to feel the full effect of Trump’s tariffs. For the time being, many businesses may be pulling products they already had in their inventories rather than passing along higher costs from fresh imports.

Financial markets also had only modest reactions to the conclusion of two days of trade talks between the United States and China in London.

Trump said Wednesday that China will supply rare-earth minerals and magnets to the United States, while his country will allow Chinese students into U.S. universities, in a deal that still needs an agreement by China’s leader. Trump also said that “President XI and I are going to work closely together to open up China to American Trade. This would be a great WIN for both countries!!!”

Investors had been hoping for a more sweeping deal that would lower tariffs by enough to help the economy avoid a recession. Hopes for such deals between the United States and China, along with other countries, have been one of the main reasons the S&P 500 has charged nearly all the way back to its all-time high after dropping roughly 20% below a couple months ago.

On Wall Street, Chewy tumbled 12% after the seller of pet supplies reported a weaker profit for the latest quarter than analysts expected.

Tesla helped support the market after rising 2%. It’s been recovering much of its big losses taken last week after Elon Musk’s relationship with Trump imploded, which in turn raised fears about a loss of business for the electric-vehicle company. Musk on Wednesday backed away from some of his earlier comments and said they went “too far.”

In the bond market, the yield on the 10-year Treasury fell to 4.43% from 4.47% late Tuesday. Shorter-term yields, which more closely track expectations for what the Fed will do with overnight interest rates, fell even more.

Wednesday’s better-than-expected reading on inflation raised expectations along Wall Street that the Fed could cut its main interest rate at least twice by the end of the year.

The Fed has been keeping interest rates steady so far this year, going on pause after cutting rates at the end of last year, It has been waiting to see how much Trump's tariffs raise inflation because cutting interest rates could push inflation up even more, while they help give the economy a boost.

In stock markets abroad, indexes rose modestly across much of Europe and Asia. South Korea’s Kospi was one of the best performers and jumped 1.2%.

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AP Business Writer Yuri Kageyama contributed.