US stocks rebounded on Thursday as investors digested easing inflation pressures from the latest reading on consumer prices that could help set expectations for the path of interest rates. The tech-heavy Nasdaq Composite led the way up with a gain of 1.4%, pushed north by a strong earnings report from Micron, which saw its shares rise by 10%. The tech gain came after AI trade worries had spurred another bruising session for tech on Wednesday. Shares in the benchmark S&P 500 and the blue chip-heavy Dow Jones Industrial Average rose around 0.8% and 0.2%, respectively.
Headlining the morning was a cooler-than-expected Consumer Price Index (CPI) report, which showed inflation rose 2.7% in November over the prior year and 2.6% on a “core” basis — both figures coming in below economist estimates of 3% and 3.1%, respectively. As with Tuesday’s monthly jobs report, economists have noted that the inflation data may be less reliable than normal thanks to the US government shutdown. At the same time, the Federal Reserve seems more attentive to cracks in the labor market than to price pressures. On Wednesday, Fed governor Chris Waller signaled support for rate cuts before the release of the CPI update.
On the jobs front, the Department of Labor reported initial jobless claims of 224,000 for the week ended Dec. 13, down 13,000 from the previous week’s figure. But that data has also been subject to significant volatility in the wake of the federal shutdown. Meanwhile, Wall Street is keeping watch for more signs of tech malaise after Oracle lost key backing for a $10 billion data center project, sending its stock tumbling on Wednesday along with heavyweight names like Nvidia and Broadcom. Micron’s earnings late Wednesday painted a rosier picture for AI demand, as the Nvidia supplier forecast next quarter’s adjusted profit to be nearly double what analysts expected.
Elsewhere, Trump Media & Technology Group agreed to a $6 billion deal to merge with Tae Technologies, a fusion power group backed by Alphabet and Chevron. Shares in Trump Media, the home of the Truth Social platform, surged after the announcement, seen as a bet on AI-fueled energy demand. The deal underscores a bet on the energy demands from AI and data centers and the technologies that could prevail. TAE’s backers include tech giant Google, Goldman Sachs, and oil major Chevron. Stocks jumped on Thursday as Micron Technology’s earnings put the AI trade back on track, and cooler-than-expected inflation raised the odds of more dovish Federal Reserve policy next year. The tech-heavy Nasdaq Composite rose 1.3%, recovering from losses on Wednesday. The S&P 500 gained 0.8% while the blue chip-heavy Dow Jones Industrial Average edged up by about 0.1%. Micron results came in well above expectations, showing data center demand for memory chips is strong. The company’s production for next year is already 100% allocated, lifting optimism that the AI trade is far from over. Stocks also rose after the latest reading on consumer prices for November came in cooler than expected, although October’s data was not collected due to the government shutdown. Economists expect the Fed could lean toward more cuts in 2026 if inflation is kept under control. Read more about this here.
Cannabis stocks experienced a surge in value following President Trump’s executive order to reclassify cannabis under federal law. This move is expected to have significant implications for the regulation and economic impact of the industry. Tilray saw a 2% increase in its stock price, while Canopy Growth jumped by 6% in response to the news.
The executive order directs the Department of Justice to begin the process of moving cannabis to a classification that acknowledges its medical benefits and lower risk of misuse. This reclassification could lead to increased scientific research, FDA approval for cannabis-related treatments, and reduced financial and regulatory burdens for businesses operating in the cannabis sector.
In other news, Hut 8, a crypto miner, made a strategic shift by announcing a $7 billion deal with Google to build a data center complex in Louisiana for Anthropic. This deal marks a significant move towards powering AI compute and signals a new direction for the company.
Meanwhile, Micron saw a 12% increase in its stock price, driving up the value of tech stocks as a whole. The company’s quarterly results showed a boost in revenue due to increased demand for high-bandwidth memory chips linked to artificial intelligence. This positive performance by Micron contributed to a 1.6% rise in the Nasdaq Composite, with other semiconductor and software infrastructure companies also experiencing gains.
Despite a complex inflation reading, Trump’s team boasted about lower prices, while a lack of data in the CPI report raised concerns about further interest rate cuts. Additionally, UBS projected that the AI industry could reach $3 trillion in revenue potential by 2030, emphasizing the continued strong demand for AI compute technology.
Overall, these developments highlight the dynamic nature of the markets and the ongoing evolution of industries like cannabis, cryptocurrency, technology, and AI. Investors and analysts will continue to monitor these trends closely as they navigate the ever-changing landscape of the global economy.
This lower-than-expected inflation reading eased concerns about the Federal Reserve tightening monetary policy, prompting a positive reaction from investors.
The positive sentiment was further boosted by UBS’s optimistic outlook on the market, stating that there is no evidence of an investment bubble and that company fundamentals are still robust. Hoffmann-Burchardi, a representative from UBS, believes that the market could experience tremendous growth in the coming years.
UBS predicts that the total addressable market for AI will reach $3.1 trillion in revenue potential by 2030, with a compound annual growth rate of 30% over the next five years. Additionally, they forecast that the S&P 500 could reach 7,300 by June next year and 7,700 by the end of 2026, driven by earnings growth, looser Fed policy, and the broadening adoption of AI.
In addition to the positive outlook for the S&P 500, UBS believes that structural trends like electrification and longevity will also drive equity performance in the long term.
