Wall Street Optimistic on Inflation Data and Fed Rate Cuts

U.S. stocks were set to open higher Wednesday after consumer price inflation data supported forecasts for a Federal Reserve rate cut in December. The consumer price index rose as anticipated, easing market tensions over inflation. Futures and stocks of rate-sensitive companies rallied following the data.

U.S. stocks showed signs of rebounding on Wednesday, bolstered by consumer price inflation data aligning with expectations. This kept the Federal Reserve on course to cut interest rates in December.

The consumer price index registered a 0.2% increase for the fourth consecutive month, as reported by the Labor Department's Bureau of Labor Statistics, with an annual rise of 2.6%. Excluding volatile factors like food and energy, the CPI climbed 0.3% in October, aligning with economists' forecasts and reversing futures' initial losses.

Ross Mayfield, an investment strategist at Baird, noted that the CPI's alignment with expectations provides markets the opportunity to refocus. Expectations for a 25-basis point rate cut in December jumped significantly. Meanwhile, rate-sensitive small-cap companies saw future gains following the data. The benchmark 10-year Treasury yield also eased, while Tesla saw a 2.9% gain after Elon Musk's new appointment under Trump's administration signaled potential pro-business policies.

(With inputs from agencies.)