U.S. stocks jump after an encouraging inflation update, as Micron helps AI stocks stop their slide

U.S. stocks are jumping on Thursday following an encouraging report on inflation that could help the Federal Reserve keep cutting interest rates next year. A strong profit report from Micron Technology also helped AI stocks halt their sharp slides, at least for now.

The S&P 500 rallied 1.4 per cent and is on track for its best day in three weeks, coming off a four-day losing streak. The Dow Jones Industrial Average was up 411 points, or 0.9 per cent, as of 11:45 a.m. Eastern time, and the strength for tech stocks had the Nasdaq composite up a market-leading 2 per cent.

Some relief came from a report showing that inflation was less bad last month than economists expected. That could soothe nerves at the Fed, which is responsible for keeping inflation low and for keeping the job market strong.

Inflation is still higher than anyone would like, at 2.7 per cent last month, but if it creeps closer to the Fed’s target of 2 per cent, Fed officials could feel more free to cut interest rates to help a slowing job market. Wall Street loves lower interest rates because they can boost the economy and prices for investments, even if they may also worsen inflation.

To be sure, some along Wall Street said Thursday’s inflation update may not move the needle much at the Fed given how noisy economic reports have been following the U.S. government’s earlier shutdown. Next month’s update on inflation could provide a better gauge of what’s actually happening. But a better-than-expected report on inflation is nevertheless better than the alternative.

Also helping to drive the U.S. stock market was Micron Technology, the seller of memory and storage for computers, which rallied 12.3 per cent after reporting stronger profit and revenue for the latest quarter than analysts expected. CEO Sanjay Mehrotra said each of the company’s business units enjoyed stronger revenue and made more in profit off each US$1 of that revenue.

Micron also gave encouraging forecasts for upcoming financial results, and Mehrotra credited its position as an “AI enabler,” among other things.