By 
U.S. stocks finished sharply higher on Thursday, logging their biggest single-session rally in more than two years as the Dow soared more than 1,200 points on data suggesting inflation may be peaking.
When looking at stock performance on CPI data days, both the S&P 500 and Nasdaq clinched their biggest daily gains in the history of the data series.
Falling Treasury yields and a softer dollar, driven by expectations that the Federal Reserve might opt for a smaller interest-rate hike in December, also helped to boost stocks, market analysts said.
What stocks did
The S&P 500
SPX,
+5.54%
closed up 207.80 points, or 5.5%, to 3,956.37, its highest end-of-day level since Sept. 12.
The Dow Jones Industrial Average
DJIA,
+3.70%
climbed 1,201.43 points, or 3.7%, to 33,715.37, its highest closing level since August.
The Nasdaq Composite
COMP,
+31.35%
advanced 760.97 points, or 7.4%, to 11,114.15, its biggest daily rise in percentage-point terms since March 2020.
Thursday’s move higher in stocks helped the S&P 500 and Nasdaq Composite erase all the losses from Wednesday’s session and catapulted all three indexes well into the green for the week.
Wednesday’s drop, which came after three days of consecutive gains, marked the biggest post-election day pullback since 2012, according to Dow Jones Market Data.
What drove markets
U.S. stocks rocketed higher after the release of the consumer-price inflation figures on Thursday and kept climbing.
Headline inflation retreated on a year-over-year basis to 7.7%, while the year-over-year core number declined to 6.3%. On a month-over-month basis, headline inflation came in at 0.4%, while core inflation softened to 0.3%.
See: U.S. inflation has come off the boil, but it’s going to take a lot longer to cool down
“Markets are applauding the cooler inflation print and expectations for a downdraft in rates has begun with expectations for the December 14th rate hike anchored at 50 basis points,” said Quincy Krosby, chief global strategist for LPL Financial. “Still, markets need to absorb Friday’s University of Michigan’s Consumer Sentiment Survey that includes consumer 5-10 year consumer inflation expectations, which has climbed to an uncomfortable 2.9%.”
Shortly after the data were released, the Wall Street Journal’s Nick Timiraos reported that the October report “is likely to keep the Fed on track to approve a 50-basis-point interest-rate increase next month.”
Fed funds futures traders were pricing in higher than 80% odds of a 50 basis point rate hike in December, compared with below 60% odds one day earlier, per the CME’s FedWatch tool.
Several senior Federal Reserve officials delivered public remarks on Thursday, including Philadelphia Fed President Patrick Harker, who said the Fed will slow down the pace of interest rate hikes in the coming months. Fed President Mary Daly also said the Fed should still raise its benchmark interest rate slightly above a 4.5%-4.75%.
The yield on the 10-year Treasury note
TMUBMUSD10Y,
3.819%
fell about 33 basis points to 3.828%. The rate-sensitive Nasdaq logged its biggest leap in percentage-point terms since March, 2020, when stocks were just recovering from a sharp pandemic-inspired selloff.
The ICE U.S. Dollar Index
DXY,
-2.40%
was off 2.4% at 107.85, as the euro rose to its highest level against the buck in roughly two months.
“The market is ripping higher on the heels of today’s surprising CPI report,” said Brian Price, head of investment management at Commonwealth Financial Network. “It’s not surprising because investors have been waiting for evidence that inflation is peaking. I don’t think we’re out of the woods yet by any means but today’s price action is encouraging for those who have stayed invested in a very difficult year for equities and fixed income.:
McDonald’s Corp. ended up being the only Dow component to finish Thursday’s session in the red, while the other 29 blue-chip stocks traded higher, with Salesforce Inc.
CRM,
+10.02%
in the lead.
In other markets, Bitcoin
BTCUSD,
-0.94%
recovered some ground Thursday, after falling to its lowest level since 2020 this week on expectations that FTX and its related companies might be headed for insolvency. The price of bitcoin was up 12% in the last 24 hours near $17,878, according to CoinDesk.
Companies in focus
Coinbase
COIN,
+10.74%,
a cryptocurrency exchange finished higher after Oppenheimer said Coinbase was well-positioned after the failed deal between Binance and FTX. The modest rebound in the price of bitcoin and other cryptocurrencies was helping to lift some crypto-linked stocks on Thursday. MicroStrategy Inc. MSTR, Riot Blockchain Inc. RIOT and Coinbase Global Inc. COIN were all up sharply.
Rivian
RIVN,
+17.42%
was up 17.4% after the electric-vehicle maker posted a narrower-than-expected quarterly loss and kept its 2022 production estimates intact despite saying supply-chain snags continue to be a concern.
Apple
AAPL,
+8.90%
gained 8.9% as bond yields dropped lifting the broader tech sector. Additionally, Morgan Stanley reiterated it as overweight.
Target
TGT,
+7.44%
jumped after Jefferies reiterated the retail giant as a buy ahead of Target’s earnings next week.
Astra Zeneca
AZN,
+6.62%
gained6.6% after the pharmaceutical company lifted its guidance for the full year after reporting a swing to net profit and higher sales for the third quarter of the year,
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