NEW YORK — As of 9:49 a.m. ET on Thursday, December 18, 2025, U.S. stocks were higher across the board after a softer-than-expected inflation update revived interest-rate cut hopes and a Micron surge lifted chip and AI-linked shares.
US stock market snapshot at 9:49 a.m. ET
Early trading showed a risk-on tone:
- S&P 500 tracking fund SPY: +0.8%
- Nasdaq 100 tracking fund QQQ: +1.2%
- Dow Jones tracking fund DIA: +0.6%
- Russell 2000 tracking fund IWM: +1.2%
In markets tied closely to Fed expectations, investors leaned into the “lower rates later” theme:
- 10-year Treasury yield eased to about 4.13% (down roughly 2 basis points)
- The U.S. dollar index slipped to around 98.25 [1]
That combination—stocks up, yields down, dollar softer—is the classic signature of traders pricing a friendlier path for monetary policy.
Why stocks are up: Inflation cools more than expected, but data is messy
The catalyst was the November Consumer Price Index (CPI) update. With the federal government shutdown still distorting the data pipeline, the Bureau of Labor Statistics published year-over-year readings but did not provide the normal month-to-month detail.
Still, the headline numbers surprised to the downside:
- CPI: +2.7% year over year (below economists’ expectations of 3.1%)
- Core CPI: +2.6% year over year (down from 3.0% in September) [2]
The market’s immediate reaction was clear: equity futures extended gains after the report, while yields and the dollar fell. [3]
The catch: shutdown fallout means investors are trading through “data fog”
Economists and strategists cautioned that the CPI signal may be noisier than usual, because:
- the October CPI report was canceled (the government shutdown prevented collection of price data that couldn’t be recreated later), and
- November’s collection window may have been distorted—potentially capturing late-month discounting more heavily than normal. [4]
That’s why some forecasters argue the Federal Reserve may treat November’s inflation cooling as encouraging but not decisive, putting heavier weight on the December CPI due in mid-January. [5]
Rate-cut debate re-ignites: What Wall Street expects from the Fed next
Traders entered Thursday already sensitive to any inflation surprise because the Fed only recently cut rates and then signaled it might slow down.
What the Fed did last week
On December 10, the Federal Reserve cut rates by 25 basis points to a 3.50%–3.75% range, while communication around the decision leaned toward a pause as policymakers wait for clearer labor and inflation signals. [6]
New projections released with that decision showed a median expectation of one cut next year, even as market pricing has often leaned more dovish. [7]
What changed today
The softer CPI print strengthened the argument of “Fed doves” who believe inflation pressure is fading while labor-market risks are rising. In the immediate aftermath of the CPI release, strategists highlighted:
- The report “tilts” the near-term balance toward easing, even if it’s only one noisy data point. [8]
- Some market participants see the numbers as opening the door to not just one, but potentially two cuts in early 2026—if upcoming data supports the trend. [9]
At the same time, other voices stressed the Fed may try to avoid overreacting because the data is unusually difficult to interpret—meaning January cut expectations can rise, but conviction may remain fragile until mid-January’s CPI. [10]
The political overlay investors are watching
Adding to the rates narrative, President Donald Trump said the next Fed chair will favor significantly lower interest rates, while noting he expects to announce a successor to Chair Jerome Powell early next year. Reuters reported finalists include Kevin Hassett, Kevin Warsh, and Chris Waller, and also noted mortgage rates have remained stuck in the 6.3%–6.4% range since Labor Day—underscoring that longer-term yields, not just the Fed’s overnight rate, shape borrowing costs. [11]
Markets typically dislike uncertainty around Fed independence, so this remains a background volatility risk even on a strong CPI morning.
Economic data check: jobless claims steady, Philly Fed shows manufacturing weakness
While CPI grabbed the spotlight, two other U.S. releases helped frame the macro picture:
Weekly jobless claims
Initial jobless claims fell to 224,000 for the week ending Dec. 13, roughly in line with expectations, suggesting a labor market that is cooling but not cracking. Continuing claims rose to about 1.897 million, a sign some unemployed workers may be taking longer to find new jobs. [12]
Philadelphia Fed manufacturing survey
The Philadelphia Fed’s December Manufacturing Business Outlook Survey painted a softer factory backdrop. The diffusion index for current general activity declined to -10.2, staying negative for a third straight month—consistent with cautious manufacturing conditions even as some forward-looking measures remained elevated. [13]
The combination—steady claims, weaker regional manufacturing, cooler inflation—feeds a market narrative that the Fed could have more flexibility to support growth if inflation risks are truly easing.
Big market movers: Micron leads, chips rebound, small caps outperform
Micron ignites the chip trade
The standout corporate story in early trading was Micron Technology, which jumped sharply after issuing a stronger-than-expected profit outlook tied to tight supply and high prices for high-bandwidth memory (HBM)—a critical input for AI data centers. Reuters reported Micron expects supply tightness to persist beyond 2026 and is planning $20 billion in 2026 capex; the stock is up roughly 168% in 2025. [14]
In early trading, Micron was up around 16%, reinforcing a broader bid in semiconductors and AI-adjacent names. [15]
AI-linked mega-caps stabilize after Wednesday’s wobble
Reuters also flagged that Nvidia and Oracle were among the names recovering after a prior-session selloff tied to worries around AI infrastructure spending. [16]
Small caps catch a tailwind
Small caps outperformed early, consistent with falling yields and the idea that rate relief helps more debt-sensitive parts of the market. [17]
Other stocks in focus Thursday morning
Several single-stock stories contributed to the tape:
- Lululemon rose after reports that activist investor Elliott Management built a stake worth more than $1 billion, as the apparel retailer faces leadership transition questions. [18]
- Birkenstock slid after it flagged more muted growth and profit pressure, with tariffs cited as a margin headwind in market coverage. [19]
- Trump Media & Technology Group surged after news around a deal to take TAE Technologies public via merger. [20]
- Cannabis stocks drew attention after a report suggested Trump was expected to address marijuana regulations, boosting the sector early. [21]
Global backdrop: Central banks and cross-asset sentiment
Outside the U.S., investors were also digesting major central-bank decisions. The Bank of England cut rates to 3.75% in a close vote, while the ECB held rates—a mix that added to the broader “peak rates are behind us” psychology globally. [22]
That matters for U.S. stocks because global rates feed into the worldwide cost of capital—especially for high-growth sectors whose valuations are most sensitive to discount rates.
Market outlook: What strategists are forecasting next
Thursday’s rally is built on a straightforward thesis: if inflation is cooling faster than feared, the Fed can cut sooner, and that supports stock valuations.
But the forecasts are far from unanimous, largely because the shutdown damaged the usual data continuity:
- Some strategists argued the CPI undershoot strengthens the case for a January cut, with the possibility of two cuts in early 2026 if subsequent releases confirm the trend. [23]
- Others emphasized the Fed is unlikely to “move the needle” on one report given potential bias in the data and the lack of month-over-month detail—meaning mid-January’s CPI may become the true decision point. [24]
- On tariffs, Reuters cited analysis suggesting retailers had passed through about 40% of tariff costs by September, with a path toward 70% by March—an important reminder that inflation risks may not be fully gone even if the headline CPI cools. [25]
The practical takeaway for investors: Thursday’s bid improves sentiment, but markets could stay jumpy until data normalizes.
What to watch for the rest of today
Even with CPI in hand, Thursday still has several potential catalysts:
- Earnings after the bell: Investors are watching results from large consumer and logistics names—especially Nike and FedEx—for read-through on demand, inventories, and global trade conditions. [26]
- Rate expectations: Traders will keep tracking how quickly “January cut” pricing builds—or reverses—depending on intraday Fed commentary and bond-market behavior. [27]
- Year-end positioning: With December liquidity often thinner, the market can exaggerate moves—especially in crowded themes like semiconductors and AI infrastructure. [28]
Longer-term market theme emerging today: IPO confidence for 2026
Beyond the morning’s CPI and chips story, one forward-looking signal also landed on December 18: Nasdaq said it expects a stronger pipeline of billion-dollar-plus IPOs in 2026.
Reuters reported U.S. IPOs have raised about $74.7 billion year-to-date (up roughly 80% from last year), and that Nasdaq expects the environment to support more large listings—citing improving conditions such as easing rate pressure, strong sentiment, and elevated valuations. [29]
References
1. www.reuters.com, 2. www.reuters.com, 3. www.reuters.com, 4. www.reuters.com, 5. www.reuters.com, 6. www.reuters.com, 7. www.reuters.com, 8. www.reuters.com, 9. www.reuters.com, 10. www.reuters.com, 11. www.reuters.com, 12. www.reuters.com, 13. www.philadelphiafed.org, 14. www.reuters.com, 15. www.reuters.com, 16. www.reuters.com, 17. www.reuters.com, 18. www.marketwatch.com, 19. www.reuters.com, 20. www.reuters.com, 21. www.reuters.com, 22. www.theguardian.com, 23. www.reuters.com, 24. www.reuters.com, 25. www.reuters.com, 26. www.barrons.com, 27. www.reuters.com, 28. www.reuters.com, 29. www.reuters.com
