The S&P 500 appears poised to snap a four-day losing streak on Thursday as unexpectedly cooler inflation data reignited hopes for Federal Reserve rate cuts in 2026.
The rebound was turbocharged by Micron Technology’s blowout earnings guidance, which sparked a powerful rally in semiconductor and AI-related stocks.
The Nasdaq Composite surged 1.5% driven by chip momentum, while the S&P 500 climbed roughly 1%.
The Dow Jones Industrial Average gained about 0.7% as investors pivoted back into technology and growth-oriented equities.
US stocks rise after inflation surprise
November’s consumer price index came in at 2.7% year-over-year on Thursday, substantially lower than the 3.1% consensus forecast and marking the slowest pace since July 2025.
Core inflation, which excludes volatile food and energy, also decelerated to 2.6% annually, the lowest rate since March 2021.
The softer reading immediately reshaped expectations at the Fed.
Market pricing for rate cuts in 2026 jumped sharply, with traders now assigning higher probabilities to two cuts next year compared to market odds just 24 hours earlier.
Treasury yields compressed substantially on the news, with the 10-year yield falling roughly 7 basis points to near 4.15% in morning trading.
However, economists cautioned against interpreting the data with appropriate skepticism.
The government shutdown earlier this month disrupted normal data collection procedures, with the Bureau of Labor Statistics unable to gather October readings retroactively and instead relying on alternative “nonsurvey data sources” for calculations.
This caveat suggests the true inflation trajectory may prove clearer once December’s reading arrives on January 13 with uninterrupted data collection.
Micron’s results reignite AI and memory trade
Micron’s quarterly earnings provided the session’s second major catalyst.
More than the earnings, the management’s forward guidance proved the real market-mover as they forecasted first-quarter revenue of $21.5 to $22.3 billion, well above the Street’s prior consensus of $19.8 billion.
The investors took it as a signal that high-bandwidth memory (HBM) supply remains critically tight heading into calendar 2026.
Micron surged over 11% and held most gains through the session.
The company flagged that HBM capacity will sell out completely throughout 2026 at meaningfully higher prices than current levels, while gross margins are expected to reach 67 to 69% in the current quarter.
This margin expansion, driven by severe supply constraints and AI-driven demand from hyperscalers, rippled across the semiconductor complex.
Nvidia rose over 2% to lead the Magnificent Seven megacaps, while Broadcom and AMD both climbed on the sentiment shift.
The broader Philadelphia Semiconductor Index jumped roughly 2.3%, reversing Wednesday’s sharp declines that had spooked tech investors.
Strategists noted that Micron’s guidance effectively removed near-term bear case fears about a stall in AI infrastructure spending or hyperscaler capex pullbacks.
The investors are expected to remain laser-focused on upcoming economic data and Fed commentary.
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