US stocks moved sharply higher after a softer-than-expected inflation reading gave investors renewed confidence that interest rates could continue drifting lower next year. The US stocks inflation report provided a welcome catalyst following several volatile sessions, while strong earnings from Micron Technology reignited optimism across artificial intelligence and semiconductor names.
The S&P 500 rose about 1.1%, snapping a four-day losing streak. The Dow Jones Industrial Average jumped more than 400 points, and the Nasdaq Composite gained roughly 1.5%. Together, these moves signaled that investors were ready to step back into risk assets after recent anxiety over valuations and monetary policy.
Inflation Data Supports Rate-Cut Narrative
At the heart of the rally was an encouraging inflation report showing that price pressures eased more than economists anticipated last month. While inflation remains above the Federal Reserve’s long-term target, the slower pace reinforced expectations that policymakers could keep cutting interest rates in 2026 if the trend holds.
For markets, the implication is straightforward. Lower inflation reduces the need for restrictive policy, which supports higher equity valuations—particularly for growth and technology stocks that are sensitive to discount rates. After weeks of debate about whether rates would stay “higher for longer,” Thursday’s data shifted the tone back toward cautious optimism.
Micron Earnings Spark AI Stock Rebound
Another key driver was Micron Technology (NASDAQ:MU), which delivered a standout earnings report. The memory and storage chipmaker easily beat Wall Street’s first-quarter profit and revenue estimates, sending its shares soaring more than 12% intraday.
Micron said demand tied to artificial intelligence accelerated during the quarter, pushing both revenue and profit to record highs. That commentary helped calm fears that spending on AI infrastructure might be peaking. As a result, several AI-linked stocks that were hit hard earlier in the week stabilized or rebounded.
Broadcom (NASDAQ:AVGO) and Oracle (NYSE:ORCL) both traded higher, benefiting from renewed confidence in enterprise and cloud-related AI spending. The strong Micron results suggested that, at least for now, the massive investments flowing into AI hardware are still translating into real revenue growth.
Markets Recover From Recent Weakness
The rally followed a difficult session the day before, when concerns about lofty valuations dragged AI stocks to their worst performance in nearly a month. Futures markets had already hinted at a rebound before the opening bell, but the combination of inflation relief and Micron’s earnings gave stocks a stronger push higher once trading began.
Investors appear to be distinguishing between near-term volatility and longer-term fundamentals. While questions remain about whether Big Tech stocks have run too far, the latest US stocks inflation report provided breathing room for bulls betting that earnings growth can justify current prices.
Corporate News Beyond Tech
Outside the technology sector, Lululemon Athletica (NASDAQ:LULU) surged more than 7% after reports that activist investor Elliott Management has taken a stake exceeding $1 billion. The reports suggest Elliott is pushing for leadership changes, including the appointment of a new CEO, which investors interpreted as a potential catalyst for unlocking shareholder value.
Such moves highlight that, even in a macro-driven market, company-specific developments can still play a major role in stock performance.
Global Markets Show Mixed Reaction
Overseas, markets were more subdued. In Europe, stocks edged modestly higher as investors digested interest rate decisions. The Bank of England cut its key rate by a quarter point to 3.75%, its first reduction in four months, citing early signs that stubborn inflation pressures are easing.
In Asia, the picture was less upbeat. Japan’s Nikkei slipped as technology shares retreated, weighed down by declines in SoftBank Group (TYO:9984), Tokyo Electron (TYO:8035), and Advantest (TYO:6857). Automaker Honda Motor (TYO:7267) also fell after reports of production suspensions linked to semiconductor shortages.
South Korea’s market declined as well, with LG Electronics (KRX:066570) and Samsung Electronics (KRX:005930) posting losses. Chinese markets were mixed, reflecting ongoing uncertainty about growth momentum in the region.
Oil Prices and the Broader Economic Backdrop
In energy markets, oil prices edged higher but remain under pressure for the year. U.S. crude traded near $56 per barrel, while Brent hovered around $60. Expectations that global supply remains ample relative to demand have kept a lid on energy prices, adding another disinflationary tailwind for the global economy.
What the Inflation Report Means Going Forward
Taken together, the market’s reaction underscores how sensitive investors remain to inflation data. The latest US stocks inflation report does not guarantee a smooth path for equities, but it does reduce one of the biggest near-term risks: the possibility of renewed rate hikes.
For now, easing inflation, resilient earnings, and selective strength in AI-related stocks suggest that the market’s longer-term uptrend remains intact—even if volatility continues.
Featured Image – Freepik
