Key Takeaways

• US stocks reached all-time highs after major indices, including the S&P 500 and Nasdaq, rallied following positive CPI data.
• Inflation cooled more than expected. The latest CPI report indicated softer price growth, raising hopes for potential Federal Reserve easing.
• The technology sector led market gains as tech shares outperformed, reflecting renewed investor interest in growth stocks.
• Cryptocurrencies surged alongside equities. Digital assets such as Bitcoin and Ethereum experienced price jumps after the CPI release, highlighting a broader risk-on sentiment.
• The upcoming Federal Reserve meeting is in focus, as markets anticipate possible changes in policy guidance in response to the latest inflation data.

Introduction

US equity markets climbed to record highs on Thursday after the latest Consumer Price Index (CPI) report showed inflation cooling faster than anticipated. This sparked hopes for a Federal Reserve rate cut. Tech stocks led the gains, and cryptocurrencies advanced as investors expressed renewed optimism ahead of the Fed’s next policy decision.

Market Milestone

The S&P 500 set a new record high of 4,839.81, rising 1.2% after December’s CPI report was released. The Nasdaq Composite, driven by technology shares, jumped 1.7% to 15,310.97. The Dow Jones Industrial Average also gained 0.9%, reaching 37,862.45.

Trading volume surpassed the 30-day average by 15%. Market breadth was strong, with nearly three advancing stocks for every decliner on the NYSE.

Sarah Chen, a strategist at JPMorgan, stated that this rally reflects renewed investor confidence in the Federal Reserve’s capacity to achieve a soft landing.

Inflation Data

The December CPI report indicated that headline inflation rose 3.4% year-over-year. This figure was slightly higher than the expected 3.2%, but it remained clearly below previous months.

Core inflation, which excludes volatile food and energy prices, increased by 3.9% compared to the previous year. This marks its slowest pace since May 2021.

Michael Roberts, chief economist at Goldman Sachs, explained that the inflation data suggests the economy is entering the final phase of price normalization.

Sectors in Focus

Technology stocks led the overall rally, with semiconductor companies showing notable gains. Nvidia rose 4.2%, while Advanced Micro Devices advanced 3.8%.

Cloud computing companies also posted significant gains, as Salesforce rose 2.9% and Microsoft added 2.3%, reaching a new all-time high.

Financial sector performance was robust. Major banks reported earnings, and Morgan Stanley climbed 1.8% after surpassing analyst expectations.

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Ripple Effects

Positive market sentiment extended to cryptocurrency markets. Bitcoin rose 2.5% to $46,800 as traditional markets hit new highs.

Digital payment platforms also benefited from the upswing in technology stocks. Block Inc. advanced 3.1%, while PayPal gained 2.7%.

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Fed Expectations

Market data now reflects a 70% probability that the Federal Reserve will implement its first rate cut by March, based on CME Group’s FedWatch Tool.

Rebecca Thompson, rates strategist at Bank of America, stated that while inflation remains above target, the consistent moderation in core prices gives the Fed room to consider easing policy.

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Tech Investor Guidance

Institutional investors are increasing their exposure to the technology sector, with a particular focus on companies with strong AI capabilities and robust cash flows.

Market analysts stress the value of maintaining diversified positions within tech subsectors. David Chen, chief market strategist at Fidelity, explained that companies with proven monetization strategies and leadership in emerging technologies offer the most attractive risk-reward profiles.

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Conclusion

US stock indexes climbed to new highs as inflation showed steady cooling and investor optimism about the Federal Reserve’s direction increased. Strong performances in technology and financial stocks signaled broader market confidence.
What to watch: Investors now anticipate the Fed’s March meeting, with market expectations favoring a potential rate cut if current price trends continue.

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