Dec 18 (Reuters) - Wall Street's main indexes closed higher on Thursday as a soft inflation report fed expectations for interest rate cuts by the Federal Reserve, while chipmaker Micron's blowout forecast signaled strong AI demand.
The Consumer Price Index report showed that consumer prices increased less than expected in the year to November. The Labor Department's Bureau of Labor Statistics did not publish month-to-month CPI changes after the 43-day shutdown of the government prevented the collection of October data.
"The constructive CPI report ... starts to ease pressure on policymakers further to potentially get more comfortable cutting rates next year," said Bill Merz, head of capital markets research at U.S. Bank’s Asset Management Group. "We’ll want to see follow-through next month to ensure there wasn’t too much noise from the shutdown."
The three major indexes rebounded from three-week lows. And the Russell 2000 index (.RUT), opens new tab, tracking rate-sensitive smallcaps, also advanced.
A jobless claims report showed new applications fell last week, reversing the prior week's surge and suggesting labor market conditions remained stable in December. Earlier this week, an official jobs report showed U.S. job growth rebounded in November and the unemployment rate rose to 4.6%.
According to preliminary data, the S&P 500 (.SPX), opens new tab gained 52.48 points, or 0.78%, to end at 6,773.91 points, while the Nasdaq Composite (.IXIC), opens new tab gained 311.60 points, or 1.37%, to 23,004.92. The Dow Jones Industrial Average (.DJI), opens new tab rose 69.36 points, or 0.14%, to 47,955.33.
Consumer discretionary stocks (.SPLRCD), opens new tab gained as Lululemon (LULU.O), opens new tab surged on a report that activist investor Elliott has acquired more than a $1 billion stake in the athletic-wear company. Starbucks (SBUX.O), opens new tab also rallied.
Among tech stocks, Micron Technology (MU.O), opens new tab jumped after the company forecast quarterly profit at nearly double what analysts were expecting on strong artificial intelligence-related demand.
Other memory companies including SanDisk (SNDK.O), opens new tab and Western Digital (WDC.O), opens new tab also surged, while the Philadelphia SE Semiconductor Index (.SOX), opens new tab climbed.