U.S. stocks showed a positive trend on Thursday morning, bolstered by a surprising inflation update that rekindled hopes for potential interest rate cuts. Key indices reflected a robust risk-on sentiment, with the S&P 500 tracking fund SPY up 0.8%, the Nasdaq 100 tracking fund QQQ leading with a 1.2% gain, the Dow Jones tracking fund DIA rising by 0.6%, and the Russell 2000 tracking fund IWM also up 1.2%.
The market’s upward movement can be largely attributed to a more favorable reading of November’s Consumer Price Index (CPI), which reported a year-over-year increase of 2.7%, falling below economists’ predictions of 3.1%. Core CPI, which excludes volatile food and energy prices, registered a year-over-year rise of 2.6%, down from 3.0% in September.
Despite these positive indicators, analysts warned that the recent government shutdown may result in a distorted data environment. The shutdown affected the collection of price data, meaning the CPI figures could lack the usual level of granularity, particularly given that the October CPI report was canceled. This has led to concerns that current inflation signals might be misleading, prompting some economists to advocate for caution in interpreting the November data.
The Federal Reserve had recently cut interest rates by 25 basis points to a 3.50%-3.75% range, indicating a pause in rate changes as they awaited clearer labor market and inflation signals. The recent CPI data fortified the position of those advocating for continued rate cuts, suggesting the Fed could ease its stance if subsequent economic indicators support the trend.
Market sentiment has been further influenced by political dynamics, with President Donald Trump indicating that his choice for the next Fed chair would be inclined toward significantly lower interest rates. This anticipated leadership change adds a layer of uncertainty regarding Fed independence—something that could lead to increased market volatility.
In broader economic news, initial jobless claims remained steady at 224,000 for the week ending December 13, suggesting a labor market that is cooling, but not deteriorating significantly. Additionally, the Philadelphia Fed’s Manufacturing Business Outlook Survey indicated a continued softness in manufacturing, with the diffusion index dropping to -10.2 for the third consecutive month.
Among individual stocks, Micron Technology stood out in early trading by surging approximately 16% following a strong profit outlook related to high demand and limited supply for high-bandwidth memory products essential for AI applications. The chipmaker’s robust performance fueled a rebound in semiconductor stocks, contributing to broader market gains.
Other noteworthy movements included Lululemon’s increase following news of a significant investment by Elliott Management, while Birkenstock’s shares declined due to muted growth forecasts. Trump Media & Technology Group also saw gains driven by merger news.
On a global scale, the Bank of England’s recent decision to cut rates and the European Central Bank maintaining its position added to a prevailing global sentiment that peak interest rates may be behind us, influencing U.S. stock valuations particularly in high-growth sectors sensitive to interest rates.
Looking ahead, investors remain focused on earnings results from major consumer and logistics companies, including Nike and FedEx, which will provide further insight into demand trends and supply chain dynamics. The potential for additional rate cuts in January will also be closely monitored, as traders evaluate how quickly market expectations adjust based on upcoming economic data.
In a notable forward-looking signal, Nasdaq announced expectations for a healthier pipeline of billion-dollar IPOs in 2026, potentially buoyed by easing rate pressures and improved market sentiment that could further invigorate the financial landscape.
