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Wall Street Sends Big Tech to Fresh Highs Post-CPI: Markets Wrap

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Wall Street Sends Big Tech to Fresh Highs Post-CPI: Markets Wrap

(Bloomberg) — Investors’ enthusiasm for US technology giants sent stocks higher Wednesday, snapping a two-day slide after a benign inflation report cemented expectations that the Federal Reserve will keep cutting interest rates. Treasuries ended the day lower.

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The Nasdaq 100 climbed 1.9% to a record while the S&P 500 rose 0.8%, nearing a recent peak. Broadcom Inc. led the advance following a report that the chipmaker was working on an AI deal with Apple Inc. The so-called Magnificent Seven were once again in the pole position, with shares of Tesla Inc., Amazon.com Inc. and Facebook-parent Meta Platforms Inc., setting all-time highs. Wall Street’s optimism proved enduring even as inflation remains stubbornly above the central bank’s target.

The consumer price index rose 0.3% in November for the fourth-straight month, while core CPI, which excludes volatile food and energy costs, rose by the same amount, Bureau of Labor Statistics figures showed Wednesday. The core gauge — economists’ preferred number — was up 3.3% from a year before, inline with estimates.

To Skyler Weinand, chief investment officer at Regan Capital, the report “gives the Federal Reserve the green light for a 25 basis point rate cut at the December meeting, as it helps to confirm that we are still making progress on inflation even though it remains sticky.”

Swaps traders are betting on a quarter-point interest rate cut at the Fed’s policy meeting next week. But whether the Fed will execute more than three similarly sized cuts over the next 12 months remains a key question amid concerns that President-elect Donald Trump’s policies could further spark inflation.

Treasuries failed to hold an initial gain after the data with the yield on the benchmark 10-year rising to 4.27%.

“Next week’s Fed cut will be accompanied by an update to the SEP that will offer clarity on the current stance of the Committee regarding further cuts in the year ahead,” Ian Lyngen at BMO Capital Markets wrote. “We’re sticking with our view that a pause in January to assess Trump’s initial few weeks in the White House will prove the path of least resistance.”

Lyngen expects Thursday’s producer prices, barring any surprises, should help solidify estimates around the Fed’s favored inflation gauge, personal consumption expenditures. The final PCE readout of the year is expected next Friday.

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