U.S. Stocks Rise After Softer Inflation Data Strengthens Rate-Cut Expectations

U.S. equities climbed on Friday after fresh inflation data came in softer than expected, reinforcing market confidence that the Federal Reserve may begin cutting rates earlier in 2026. The report eased concerns about persistent price pressures and helped solidify expectations of a more dovish policy path.

The S&P 500 and Nasdaq 100 both advanced, led by gains in tech, communication services, and consumer discretionary sectors. Rate-sensitive stocks benefited the most as Treasury yields continued to drift lower following the data release.

The monthly core inflation figures showed a clear cooling trend, with both headline and core components aligning with the Fed’s preferred trajectory. Traders responded by increasing bets on a March rate cut while modestly pricing the possibility of a move as soon as January.

The U.S. dollar weakened across the board, extending its broader downtrend as yield differentials narrowed. The euro and pound gained, while the yen strengthened slightly as investors continued positioning around potential policy shifts from the Bank of Japan.

Gold pushed higher, supported by lower yields and renewed demand for hedges amid ongoing uncertainty around the government shutdown and delayed economic data. The metal broke above short-term resistance zones, indicating strong underlying momentum.

In commodities, oil futures stabilized after several volatile sessions, finding support from improved risk sentiment and expectations of steady demand into year-end.

For traders, the week ended with a clear message: cooling inflation is giving the Fed room to pivot, and markets are positioning aggressively ahead of 2026. If upcoming data confirms the downtrend, risk assets may see further upside—but a single hot print could quickly disrupt the newly-established optimism.