Following the November inflation report, U.S. stocks surged amid lower-than-expected levels of inflation.
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The Bureau of Labor Statistics reported on Tuesday that the consumer price index (CPI) rose by only 0.1% in November and 7.1% since last year. The report came as a welcome surprise as analysts previously estimated a 0.3% monthly increase and a 7.3% 12-month increase. Additionally, the November rates mark a much slower pace of inflation from October, when the CPI rose by 0.4% and 7.7% from the previous year.
Given the unexpected numbers, U.S. stocks soared following the report. The Dow Jones Industrial Average gained 521 points or 1.5%; the S&P 500 added 2.3%; and the Nasdaq Composite rose 3.2%, CNBC reported. Tuesday stock gains were widespread, with 2,630 New York Stock Exchange-listed stocks rising and only 190 declining.
Related: Here’s Why the CPI Report will Dictate the Market Bottom
“That was a big surprise and markets are reacting accordingly,” Steve Sosnick, chief strategist at Interactive Brokers, told CNBC. “Today is a day where the entire bullish scenario is working. Yields are lower on the inflationary story. Stocks love the story of a less restrictive Fed and the dollar is weaker which also helps stocks.”
The November inflation numbers could also affect the Fed’s decision on the next interest rate hike during its two-day policy meeting starting Wednesday. With inflation showing signs of slowing down, the report could persuade the Fed to raise rates slightly less aggressively.
Related: Treasure Secretary Janet Yellen Predicts ‘Much Lower Inflation’ By End of 2023
