The optimism stems from the release of the Consumer Price Index (CPI) for September, which indicated lower-than-expected inflation, bolstering expectations of a Federal Reserve reference rate cut.
The session results show the Dow Jones Industrial Average gained 1.01% to 47,207.12 points, the Nasdaq rose 1.15% to 23,204.87 units, and the S&P 500 advanced 0.79% to 6,791.69.
Inflation figures released before the stock exchange opened “pave the way for a Fed interest rate cut in October, expected to be followed by further reductions,” commented Angelo Kourkafas of Edward Jones.
Data from the Department of Labor, released nine days later than initially scheduled, show ongoing inflation acceleration in September at three percent year-on-year, up from 2.9% in August.
However, analysts expected 3.1%.
“Despite the continued visible impact of tariffs, they are less severe than feared,” noted Bernd Weidensteiner from Commerzbank.
Kourkafas highlighted “several positive aspects” in the report, particularly regarding consumer goods and real estate costs.
This information reassured investors expecting a half-point interest rate cut by the end of the year, as per CME Fed Watch expectation survey.
Lower rates tend to support economic activity and enhance corporate profit prospects.
However, Nancy Vanden Houten of Oxford Economics reminded that “inflation remains well above the Fed’s two percent target.”
Commercially, “a sense of confidence fuels market risk appetite,” said Jose Torres of Interactive Brokers.
Indeed, the White House announced a meeting between Donald Trump and Xi Jinping next week, raising the possibility of easing bilateral trade tensions.
In corporate news, the peak of quarterly earnings reports shows “encouraging” performances, Kourkafas noted.
“The next two weeks will be crucial,” as technology giants Meta (Facebook, Instagram), Microsoft, and Amazon release their numbers, Kourkafas emphasized.
