Stocks climb after soft inflation print

US stocks rose Tuesday, climbing on the strength of fresh inflation data showing prices rose less than expected last month.

The S&P 500 (^GSPC) advanced by 0.7%. The Dow Jones Industrial Average (^DJI) added 0.3%, while the technology-heavy Nasdaq Composite (^IXIC) rose 1.0%.

Stocks fluctuated throughout the day, paring significant early gains in the session before ending comfortably on the green. The session’s jump came after data from the Bureau of Labor and Statistics showed prices in November rose 0.1% over the prior month and 7.1% over the prior year.

Tuesday’s data was seen by investors as potentially encouraging for the Federal Reserve to ease off its aggressive rate hikes early next year. The Fed could start down a slowing rate-hike path as soon as Wednesday, when it concludes its two-day policy meeting and will announce its latest hike.

“While this is the second consecutive month of softer-than-expected inflation, we don’t think this will change anything at tomorrow’s Fed meeting. We still expect a 50-basis-point hike, but what matters is guidance,” Gina Bolvin, President, Bolvin Wealth Management Group, wrote in a statement following the inflation data.

Following the inflation data and amid the subsequent stock rally, the dollar tumbled against most major currencies and bitcoin (BTC-USD) surged, rising as much as 5%.

Yields rose, with the yield on 10-year Treasury notes up as much as 9 basis points to around to 3.52% Tuesday after dipping to 3.45% earlier in the session.

Stocks had rallied Monday ahead of the inflation report, with the S&P 500 gaining 1.43% to kick off the new week, with energy, utilities, and tech outperforming.

The rally continued early Tuesday as the consumer price data came in cooler than expected: Economists surveyed by Bloomberg had the headline expected CPI to rise 7.3% over last year and 0.3% over the prior month.

Meanwhile, core CPI, excluding volatile food and energy components, rose 6.0% year-over-year, down from the 6.1% annual increase seen in October. The data is the final piece of the puzzle before the Fed’s final policy meeting of 2022, at which the central bank is expected to raise its benchmark interest rate by another 0.50%.

“Indeed, we don’t get many days as important as the next two, and the US CPI today and the FOMC tomorrow are likely to be the difference between a big Santa Claus rally and a visit from Scrooge ahead of Christmas,” Jim Reid and colleagues at Deutsche Bank wrote in an early-morning note Tuesday.

In commodity markets, oil prices were higher, with WTI crude over 3% to around $75.41 per barrel, driven by China’s relaxation of COVID-related restrictions.

On the corporate news front, United Airlines (UAL) has placed an order for 100 of Boeing’s top-of-the-line 787 Dreamliners with options to purchase 100 more, according to a press release. Shares of United Airlines were down nearly 7% on Tuesday.

Meanwhile, JetBlue (JBLU) shares tumbled after the company warned that demand was shaping up worse than expected. Another stock under pressure was Tesla (TSLA), as a 4% plunge sent the EV maker’s market value below $500 billion.

Moderna (MRNA) shares soared Tuesday after the company’s mid-stage trial showed the combination of its experimental melanoma vaccine and Merck’s (MRK) immunotherapy Keytruda lowered the risk of skin cancer’s recurrence or death by 44%.

Elsewhere, in the crypto world, Sam Bankman-Fried, founder and former CEO of bankrupt crypto exchange FTX, was arrested on Monday in the Bahamas after the US filed criminal charges.

Dani Romero is a reporter for Yahoo Finance. Follow her on Twitter @daniromerotv

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