S&P 500 Snaps Losing Streak on Cooler Inflation, Tech Rebound

Asian equities experienced gains following the release of US inflation data, which indicated a cooling trend, thereby strengthening the case for potential interest-rate cuts by the Federal Reserve. This positive sentiment also contributed to a rise in American stocks, alleviating previous concerns in the tech sector.

BNY Investments Chief Economist Vincent Reinhart commented on the recent government data indicating that underlying US inflation has decreased to a four-year low in November, suggesting a favorable position for the Federal Reserve to adjust its monetary policy.

U.S. inflation slowed to 2.7% in November, as reported by the Consumer Price Index, although data collection issues related to a government shutdown have distorted the findings, raising concerns among economists about the accuracy of the report.

The S&P 500 index managed to avoid a fifth consecutive day of losses on December 18, 2025, buoyed by positive developments from Micron, which has been pivotal in lifting technology stocks. This marks a notable shift in market sentiment as investors reacted favorably to Micron's performance, indicating a potential recovery in the tech sector.

The stock market experienced a significant uptick today, with the Dow Jones Industrial Average and the S&P 500 both rising sharply following a favorable inflation report. Shares in AI-linked companies, particularly Micron, surged as the company reported record revenue and operating income, signaling strong demand in the tech sector.

U.S. stock and bond markets rallied following a significant drop in inflation, as the Consumer Price Index (CPI) indicated a cooling trend, which has led to increased optimism for potential Federal Reserve rate cuts in 2026. This development has provided a boost to market sentiment, encouraging investors to re-enter the market.

The Federal Reserve has cut its benchmark federal funds rate by a quarter point during its December meeting, marking the third cut of 2025 and reducing the target range to approximately 3.5% to 3.75%. This decision comes amidst a backdrop of rising mortgage rates and declining demand in the housing market, raising concerns about the effectiveness of the rate cut.

The selection process for the next chair of the Federal Reserve is nearing completion, with the successor to Jerome H. Powell facing a significant credibility challenge. The new chair will inherit a complex economic landscape marked by internal divisions within the Fed regarding monetary policy and interest rates.