US stock indexes surged as the latest inflation data fueled expectations for an interest rate cut by the Federal Reserve at its upcoming meeting. The Nasdaq Composite Index set a new record high, driven by a 2.7% increase in consumer prices in November. The jump in prices was attributed to pricier used cars, hotel rooms, and groceries. Excluding food and energy costs, core prices rose by 3.3%.
The data from the Labor Department on Wednesday marks the final major piece of information for Federal Reserve officials to consider before their meeting next week. Wall Street traders raised the likelihood of a rate cut to 98% following the inflation report. Fed Chair Jerome Powell hinted that the economy is healthy and a rate cut could be made cautiously.
Despite the solid economic performance with a growth rate of 2.8% in the third quarter, the Fed is considering reducing rates further to align with tamer inflation. The ongoing trade tensions with proposed tariffs by President Trump on imports pose a risk of higher inflation.
Following the positive inflation report, Big Tech stocks led the way in the market, causing the Nasdaq composite to exceed 20,000 for the first time. The S&P 500 also reached a new high, and the Dow Jones Industrial Average saw a minor decline. Some notable performers included Tesla, which rose 5.9% to finish at $424.77 per share.
Overall, the optimism from investors, driven by expectations of future rate cuts, has contributed to multiple stock market highs this year.
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