Wall Street Surge on Inflation Expectations Boosts Rate Cut Bets

Wall Street's major indexes rose after October CPI data aligned with expectations, increasing bets on a December rate cut by the Federal Reserve. The CPI rose 0.2% in October, meeting forecasts. Traders now see a high probability of a rate cut, reflecting optimism about inflation trends.

In a rally on Wednesday, Wall Street's major indexes rose as the Consumer Price Index (CPI) data for October met expectations, bolstering hopes for a Federal Reserve rate cut in December. According to the Labor Department, the CPI increased by 0.2%, its fourth consecutive monthly rise.

Traders have significantly increased their bets on a December rate cut, with more than an 82% probability for a 25 basis-point cut reflected in the CME group's FedWatch tool, up from 58.7% earlier in the week. Despite some cautious tones from Fed officials, the mood remains optimistic about inflation trends.

Among the S&P 500's industry sectors, energy and consumer discretionary showed notable gains, while defensive utilities lagged. Simultaneously, Spirit Airlines faced a sharp decline amid bankruptcy concerns, while EV maker Rivian soared following increased investment from Volkswagen.