4:15pm: Record highs for Alphabet and Tesla
Big Tech stocks propelled Wall Street higher on Wednesday, as investors embraced strong gains in the technology sector and assessed inflation data that aligned with economists' expectations.
The Nasdaq outshined other indices, rallying 1.8% to close at 20,035.
The surge was driven by a sharp rally in the "Magnificent Seven" group of tech giants. Alphabet soared more than 5%, setting a record high as its shares extended their upward momentum. Tesla, Meta, and Amazon also reached new highs, with Tesla marking its first record close in over three years.
The broader market saw mixed performance. The S&P 500 climbed 0.8% to close at 6,084, while the Dow Jones slipped 0.2% to finish at 44,149, weighed down by losses in cyclical and industrial stocks.
In the cryptocurrency market, bitcoin (BTC-USD) surged past $101,300 in afternoon trading, continuing its robust rally as investors piled into the digital asset.
3:20pm: Bank of Canada lowers interest rate
The Bank of Canada lowered its interest rate by another 50 basis points to 3.25% on Wednesday but signalled it will continue to cut rates at a slower pace.
The move was in line with economists’ expectations and marked the fifth consecutive rate cut since June.
The central bank noted that the Canadian economy grew by 1% in the third quarter, below its October projection, and the fourth quarter is also looking weaker than projected.
Business investment, inventories and exports weighed on growth while consumer spending and housing activity both ticked up.
The bank also noted that the possibility the incoming Trump administration in the US could impose new tariffs on Canadian exports has “increased uncertainty and clouded the economic outlook.”
2:30pm: Alphabet's quantum leap
Shares of Alphabet were up 4.5% on Wednesday on its quantum computing advancements.
Bank of America analysts described Alphabet’s Willow quantum chip as a milestone achievement that reinforces the company’s status as a leader in next-generation technologies. “We remain constructive on Alphabet’s innovation and believe its products and capabilities are underappreciated in valuation,” the report stated.
Bank of America emphasized the strategic importance of Alphabet’s quantum computing advancements, noting that while Willow’s immediate commercial impact may be limited, its long-term implications are profound. The chip could significantly accelerate the training of foundational AI models and pave the way for breakthroughs in industries requiring high-performance computing.
The bank also highlighted Alphabet’s ongoing innovations in Tensor Processing Units (TPUs), which optimize AI workloads.
1:10pm: Broad gains
Stocks saw broad gains on Wednesday, fueled by a strong performance in Big Tech as investors digested the latest inflation data, which met economists' expectations and reinforced expectations of a Federal Reserve rate cut next week.
The Nasdaq surged by about 1.7%, with Alphabet hitting a record high, rising as much as 4.6%. The S&P 500 rose approximately 0.8%, while the Dow Jones traded largely flat after an early gain.
The CPI for November showed inflation remained sticky.
Bank of America noted that while inflation progress has stalled above the Fed's target, the report's details didn’t suggest a reacceleration of inflation. Notably, the surge in vehicle prices contributed to the rise in goods prices, while core services like airfares and lodging surprised to the upside.
A key takeaway was the moderation in rents, with both rent and owner's equivalent rent (OER) increasing by just 0.2% month-over-month, softer than the pre-pandemic averages. This suggests rents may finally be normalizing, aligning with the Fed's 2% inflation target.
In light of the data, Bank of America maintained its base case of a 25-basis-point rate cut in December, citing a likely moderation in core personal consumption expenditures (PCE) inflation. However, the firm noted that further rate cuts in January appear unlikely.
Overall, while inflation remains a concern, the data has solidified expectations for a Fed rate cut next week, buoying investor sentiment, particularly in the tech sector.
10:55am: Inflation stalling
November's CPI report provided further evidence that progress in reducing inflation has stalled, analysts at Wells Fargo said following the release of the month's inflation figures.
Both headline and core CPI inflation registered 0.3% over November, leading to year-over-year growth rates of 2.7% and 3.3%, respectively.
"Today's inflation data probably do not represent a sea change in the outlook for the Federal Reserve, and we still look for 100 bps of rate cuts from the FOMC over the next 12 months, with 25 bps rate cuts at next week's FOMC meeting and the March, June and September meetings next year," Wells Fargo wrote.
9.42am: Nasdaq leads charge as traders up rate cut bets
The Nasdaq rallied as trading got underway on Wall Street in the wake of data showing an expected uptick in inflation through November.
Markets were pricing in an interest rate cut by the Federal Reserve next week as a near certainty after the consumer price index rose by 2.7% as anticipated during the month.
The Nasdaq opened 0.8% higher on the back of the hiked expectations, while the S&P 500 surged 0.6% and Dow Jones ticked up 0.2%.
Expectations are now for interest to be reduced by a further 25 basis points at the Fed’s December meeting.
“Given how restrictive policy has been this year, there is wiggle room for the Fed to lower rates this month without triggering an uptick in inflation,” Capital.com analyst Daniela Sabin Hathorn said.
“In fact, with Trump taking office in January, many economists have predicted that his tariff and tax plans will increase price pressures, meaning the Fed will be limited next year with regards to how much it can lower rates.
“Because of this, a cut in December seems like a valid move as it brings the rate closer to normalisation before the tide may turn next year.”
1.52am: Wall Street futures turn green on in-line inflation figures
Futures pointed to a positive start for Wall Street in the wake of inflation figures for November.
As expected, the consumer price index climbed by 2.7% on an annual basis in November and by 0.3% month on month, according to the US Bureau of Labor Statistics.
The Dow Jones overcame a drop to sit 0.2% higher ahead of trading after the figures.
The Nasdaq was seen jumping 0.5% in the meantime, as the S&P 500 looked to gain 0.3%.
8.47am: Fed could ‘err on side of caution’ after inflation uptick
Policymakers may still refrain from cutting interest rates this month given an increase in the rate of inflation in November, Charles Schwab managing director Richard Flynn has noted.
Though the reading matched expectations as markets bet on a cut next week, an increase in inflation from 2.6% to 2.7% during the month may “temper” sentiment, he said.
“Several Fed speakers have recently indicated that they are unsatisfied by the rate of improvement in inflation and the regression in November fails to provide reassurance on that front.
“This may lead policymakers to err on the side of caution, opting for a pause in cutting interest rates to avoid bolstering pressure on prices.”
There was also an “argument for restraint” given “ongoing uncertainty around the fiscal direction of the incoming US administration,” Flynn added.
8.36am: US inflation in line with expectations
Inflation across the US rose in line with expectations over the year to November.
According to the US Bureau of Labor Statistics, the consumer price index ticked up 2.7% on an annual basis in November and by 0.3% month on month.
“Indexes that increased in November include shelter, used cars and trucks, household furnishings and operations, medical care, new vehicles, and recreation,” it said.
“The index for communication was among the few major indexes that decreased over the month.”
Core inflation, excluding volatile energy food items, climbed by 3.3% year over year, which was again in line with expectations.
Analysts had noted that a reading in line with expectations would firm up the likelihood of an interest rate cut by the Federal Reserve later this month.
6.48am: Mixed start seen on Wall Street
The mood on Wall Street appeared mixed ahead of key inflation figures for November.
Futures had the Nasdaq and S&P 500 up 0.3% and 0.1% respectively ahead of Wednesday’s opening bell, but the Dow Jones was seen 0.1% lower.
Focus has been on Wednesday’s consumer price index reading for November as markets mull the likelihood of an interest rate cut by the Federal Reserve later this month.
Expectations are for inflation to have risen by 2.7% over the year to November and by 0.3% month on month.
“Barring any shocks, the likelihood of an interest rate cut is high next week,” interactive investor analyst Richard Hunter commented.
Predictions over the pace of rate cuts next year have been dialled back though, he added.
“The twin drivers of a surprisingly robust economy which has shown few signs of heading towards the previously feared recession, alongside some caution that the president-elect is likely to introduce some measures which are inflationary, could well keep a lid on the monetary easing path.”