Wall Street Rises as Soft Inflation AI Data Boosts Rate-Cut Hopes
Wall Street’s major indexes ended higher on Thursday, lifted by renewed optimism that the Federal Reserve may begin cutting interest rates early next year following a softer inflation reading. Strong earnings guidance from chipmaker Micron Technology also fuelled gains across the technology sector, highlighting robust demand linked to artificial intelligence.
The Consumer Price Index (CPI) report showed that annual consumer price growth slowed more than expected in November. The U.S. Bureau of Labor Statistics did not publish monthly CPI data because a 43-day government shutdown halted the collection of October figures.
Inflation Eases Pressure on Fed
“The constructive CPI report starts to ease pressure on policymakers to keep rates high,” said Bill Merz, head of capital markets research at U.S. Bank’s Asset Management Group. “We’ll want to see confirmation next month to ensure there wasn’t too much noise from the shutdown.”
The encouraging inflation data helped the S&P 500, Dow Jones Industrial Average, and Nasdaq Composite all rebound from three-week lows. Rate-sensitive small-cap stocks, measured by the Russell 2000 index, also advanced.
A separate report showed that jobless claims fell last week, reversing the previous week’s rise and suggesting labour market conditions remained stable in December. Earlier this week, official data indicated that job growth rebounded in November, although the unemployment rate edged up to 4.6%.
Traders now price in a 58% probability of a rate cut by March, according to CME’s FedWatch Tool.
Market Recap
According to preliminary figures, the S&P 500 gained 52.48 points, or 0.78%, to close at 6,773.91. The Nasdaq Composite rose 311.60 points, or 1.37%, to 23,004.92, while the Dow Jones Industrial Average added 69.36 points, or 0.14%, to finish at 47,955.33.
Consumer discretionary stocks led gains, with Lululemon surging after reports that activist investor Elliott Management had taken a stake worth over $1 billion. Starbucks also climbed.
AI Stocks Surge
Micron Technology soared after forecasting quarterly profits nearly twice as high as analysts expected, citing surging demand for AI-related chips. The upbeat outlook lifted other memory chipmakers, including SanDisk and Western Digital, and pushed the Philadelphia Semiconductor Index higher.
Despite heavy corporate borrowing to finance AI investments, uncertainty remains over how companies will monetise the technology. Even so, enthusiasm for AI continues to drive market sentiment.
Oracle shares rebounded after Wednesday’s dip linked to funding plans for its Stargate data centre project, which had contributed to a broad market sell-off.
Trump Media & Technology also jumped after announcing a $6 billion all-stock merger with Google-backed fusion energy firm TAE Technologies, adding to market excitement around high-growth sectors.
with inputs from Reuters