Markets Rally as Inflation Slows and Rate-Cut Hopes Build – US Market Wrap
Data indicating that US inflation slowed sharply last month sparked rallies across stock and bond markets, encouraging optimism that the Federal Reserve could deliver more substantial interest-rate cuts in 2026.
Even with multiple warnings about distortions caused by the government shutdown, investors embraced the weakest rise in consumer prices since early 2021. Sentiment was further boosted by an upbeat outlook from Micron Technology Inc., highlighting continued strong demand tied to artificial intelligence.
Treasury yields fell as the inflation report eased concerns that stubborn price pressures might limit future Fed easing.
The government shutdown disrupted data collection, preventing the Bureau of Labor Statistics from gathering prices throughout October and forcing it to begin sampling later than normal in November. As a result, the significance of the latest consumer price index for policymakers depends on how much confidence they place in the data’s reliability.
Looking ahead to the Fed’s January policy meeting, interest-rate swaps suggest roughly a 20% chance of a cut. Markets are fully pricing in a reduction by mid-2026, and traders continue to expect two rate cuts next year.
US equities advanced broadly, with the S&P 500 gaining nearly 1% and a megacap index rising 2%. Micron shares surged 10%. The yield on 10-year Treasuries declined four basis points to 4.12%, while the dollar fluctuated.
Global monetary policy developments were also in focus, as German and UK bonds lagged US Treasuries after the European Central Bank and the Bank of England signaled a more hawkish stance on future interest-rate paths.
