Wall Street Gains, Tech Rallies, Tesla Hits All-Time High As Inflation Data Firms Up Fed's Next Interest Rate Cut

Wall Street kicked off Wednesday on a positive note as November inflation data came in line with expectations, leaving traders confident in the likelihood of a Federal Reserve interest rate cut next week.

The Consumer Price Index rose 2.7% year-over-year in November, slightly above October's 2.6% annual rate, but perfectly aligned with economist forecasts. Core inflation, which excludes volatile categories like food and energy, remained flat at an annual rate of 3.3%, also meeting expectations.

Following the report, the probability of a 25-basis-point rate cut at the Fed's Dec. 18 meeting surged to 96%, up from 86% before the data release, as per CME FedWatch.

This leaves little doubt that investors are almost fully pricing in an easing move by the central bank, pushing back any fears of a potential pause.

Market Reactions: Stocks Rally, Treasury Yields Dip

Key equity indices reflected growing optimism:

• The S&P 500, tracked by the SPDR S&P 500 ETF Trust SPY, gained 0.5%.
• The Nasdaq 100, represented by the Invesco QQQ Trust, Series 1 QQQ, rallied 1% to 21,556 points, just shy of its all-time high of 21,626 set last Friday.
• Blue-chip stocks traded flat, while small caps, tracked by the iShares Russell 2000 ETF IWM, climbed 0.7%.

In the bond market, Treasury yields fell across maturities:

• The 2-year Treasury yield, which is particularly sensitive to monetary policy moves, dropped 4 basis points to 4.10%.
• The benchmark 10-year yield declined by 2 basis points to 4.20%.
• The popular iShares 20+ Year Treasury Bond ETF TLT ticked up 0.1%.

Meanwhile, the U.S. dollar index (DXY) – as tracked by the Invesco DB USD Index Bullish Fund ETF UUP – held steady.

Standout Stock Performers

• Tesla Inc. TSLA climbed 1.2% to $412 per share, marking its highest level since November 2021. The rally followed Goldman Sachs' 12-month price target increase from $250 to $345.
• Broadcom Inc. AVGO surged 4%, nearly erasing its Tuesday losses as demand recovery in semiconductors bolstered sentiment.
• Boeing Co. BA gained 2.8%, extending its rally to a third session after confirming the resumption of 737 MAX production.
• Alphabet Inc. GOOGL rose 2.7%, adding to its 5.3% jump on Tuesday. Shares reached levels last seen in July and moved tantalizingly close to record highs.

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