Stock market today: Wall Street rallies with bitcoin, gold and almost everything as inflation slows

NEW YORK (AP): U.S. stocks are jumping amid a worldwide rally Wednesday following a surprisingly encouraging update on inflation.

The S&P 500 was 1.1% higher in morning trading and on track to add to its all-time high set a day earlier. The Dow Jones Industrial Average was up 270 points, or 0.7%, as of 10 a.m. Eastern time, and the Nasdaq composite was 1.6% higher.

The action was even stronger in the bond market, where Treasury yields tumbled after the report showed U.S. consumers paid prices that were 3.3% higher for food, insurance and everything else last month, versus a year earlier. Economists had been expecting to see the inflation rate stuck at 3.4%.

For Wall Street, a slowdown in inflation not only helps U.S. households struggling to keep up with fast-rising prices, it also opens the door for the Federal Reserve to cut its main interest rate. Such a move would ease pressure on the economy and give a boost to investment prices.

Everything from bitcoin to gold to copper rallied after the inflation data raised expectations for coming cuts to interest rates. A measure of nervousness among investors in U.S. stocks also eased.

Virtually no one expects the Federal Reserve to start cutting interest rates at its latest meeting, which is scheduled to end Wednesday afternoon. The Fed has been adamant that it needs an accumulation of data showing inflation is sustainably heading toward its 2% target.

“This is good news, but we will need more of it,” according to Lindsay Rosner, head of multi-sector investing within Goldman Sachs Asset Management.

But it’s welcome news after progress on bringing inflation down seemed to stall early this year. Some stronger-than-expected reports recently on the job market also raised worries about upward pressure remaining on inflation. Of course, too quick a slowdown in inflation could also raise worries that spending by U.S. consumers is falling off too sharply, which could lead to a recession.

Bets among traders built for the Federal Reserve to cut interest rates as soon as September, according to data from CME Group.

That had areas of the stock market that tend to benefit most from lower interest rates doing the best amid a widespread rally.

Smaller companies that need to borrow to grow and feel the pinch of higher interest rates more than their larger rivals were leading the market. The smaller stocks in the Russell 2000 index jumped 2.7%.

Real-estate stocks were also shooting higher. Lower interest rates mean bonds are paying less in interest, which can send potential investors to dividend-paying real-estate owners instead. Office owner Boston Properties jumped 5.9%.

Lower interest rates could also pull down mortgage rates and inject energy into the housing market. Homebuilder D.R. Horton climbed 5.2%.

Oracle helped lead Wall Street higher with a jump of 12.6% even though it reported weaker profit for the latest quarter than analysts expected. Financial analysts pointed to strong bookings, including contracts related to artificial-intelligence training.

A furor around AI has helped send stocks to records despite worries about high interest rates and the slowdown in the economy that they induce. Nvidia again was one of the strongest forces pushing the S&P 500 higher, with a gain of 3%. The chip company has become the poster child of the AI rush, and its total market value has topped $3 trillion.

In the bond market, the yield on the 10-year Treasury fell to 4.27% from 4.40% late Monday and from 4.60% a couple weeks ago. The two-year Treasury yield, which more closely tracks expectations for the Fed, slumped to 4.67% from 4.83% late Monday.

In stock markets abroad, European indexes jumped following the release of the encouraging U.S. inflation data. In Asia, where markets closed before the data came out, indexes were mixed. Japan’s Nikkei 225 index lost 0.7% as investors wait for the Bank of Japan’s latest announcement on interest rates due Friday.