Stocks skyrocketed in a buy-everything relief rally after slower-than-projected price growth spurred bets that the Federal Reserve can downshift its aggressive rate-hike path. The S&P 500 climbed 5.5% and Treasuries soared, sending the rate on two-year notes, more sensitive to monetary policy, down 25 basis points.
Rates traders downgraded the odds of another three-quarter-point rate increase in December almost to nil. The stocks rally is set to roll on in Asia, with futures for for Hong Kong, Japan and Australia all pointing to large gains.
US inflation fell in October by more than forecast, perhaps giving the Federal Reserve room to maneuver as it considers smaller interest-rate hikes, something it has said was possible in the coming months. More importantly for the central bank, the core measure that excludes food and energy also slowed more anticipated.