The latest inflation report just knocked down a key risk for markets — and stocks are soaring

• The US market got a lift from cooler-than-expected inflation and strong earnings outlook from Micron.

• Cooler CPI has nudged the odds of a rate cut higher in January.

• Micron is also soothing jitters in the AI sector, where investors have been nervous about high valuations.

Stock investors got two pieces of good news on Thursday.

US stocks jumped as investors took in a cooler-than-expected inflation report, bolstering confidence in the economy and lifting hopes that the Fed will continue its rate-cutting cycle heading into next year.

Consumer prices rose 2.7% year-over-year, according to the Bureau of Labor Statistics, lower than the 3.1% annualized increase economists were expecting.

Meanwhile, the tech sector got a break after days of weakness. Chip stocks, led largely by Micron Technology, which jumped as much as 14%. The chipmaker reported strong earnings and issued robust guidance, helping to erase some losses from Wednesday’s session.

Major indexes rose in the early morning and surged on the CPI release. The tech-heavy Nasdaq Composite rose more than 1%.

Here’s where US indexes stood shortly after the 9:30 a.m. opening bell on Thursday:

Here were the other notable moves in the tech sector:

The latest CPI data is a much-needed piece of good news for the market, which has been under pressure as investors take stock of high valuations and sort through their queasy feelings about the AI sector.

Cooler inflation, combined with a weaker US job market, has widened the path for the Fed to continue its cutting rates in 2026. The odds that the central bank will cut rates another 25 basis points by March edged higher after the CPI data.

The 10-year US Treasury yield dropped to around 4.1% on Thursday.

“The inflation bump from tariffs is behind us, so the path is now clear for the Fed to lower rates again in January. There is no longer a case for restrictive monetary policy,” Jamie Cox, a managing partner at Harris Financial Group, said in a statement.

Stephen Kates, a financial analyst at Bankrate, said the latest CPI reading suggested the Fed may already be ahead of its inflation targets for the next year.

“The numbers this morning helped support the Fed narrative that the risks to the job market were rising faster than the risks to inflation,” Scott Helfstein, the head of investment strategy at Global X, wrote in a note.

Micron, meanwhile, soothed investors’ anxieties in the AI sector, as the chipmaker reported $13.6 billion in revenue, exceeding the $12.8 billion Wall Street had expected.

The company said that it expects to pull around $18.7 billion in revenue for the current quarter, higher than the $14.2 billion analysts had pencilled in.

Investors are interpreting the results as another bit of evidence that AI chip demand is still strong. The news is quelling some anxiety over massive amounts of spending being poured into AI, which sparked a sell-off yesterday on a Financial Times report that said Blue Owl Capital had backed out of a $10 billion data center deal with Oracle.

“MU’s double-digit percentage pre-market gain has investors breathing a sigh of relief, but you can’t fault anyone for being a little cynical after seeing how some other AI-related stocks recently performed in reaction to what, at face value, looked like impressive reports,” Paul Hickey, the co-founder of Bespoke Investment Group, said.

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