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NEW YORK: US stocks surged in early trading Tuesday on news that consumer inflation cooled more than expected last month, raising expectations that the Federal Reserve is done raising interest rates.

The consumer price index (CPI) inflation gauge increased by 3.2 percent in the 12 months to October, down from 3.7 percent a month earlier, the Labor Department said.

Inflation has declined sharply since last year, although it remains stuck above the Fed’s long-term target.

Around 15 minutes into trading, the Dow Jones Industrial Average was up 1.2 percent at 34,758.93.

Wall Street wavers after rally

The broad-based S&P 500 Index surged 1.6 percent to 4,483.51, while the tech-heavy Nasdaq Composite Index jumped 2.0 percent to 14,048.67.

Tuesday’s data reduces the chances of another rate hike, which is good news for the stock markets.

Higher interest rates raise the cost of borrowing for companies, while simultaneously incentivizing investors to move money into less risky investments like bonds.

“Ain’t no reason to believe the last inflation mile will be the most difficult,” EY Chief Economist Gregory Daco said in a note to clients.

“Slower consumer demand, reduced housing rents, lower profit margins, easing wage growth and restrictive monetary policy represent the ideal disinflationary combo heading into 2024,” he added.

Among individual stocks, Home Depot was up 6.3 percent after beating expectations, while Solaredge’s shares were up more than 10 percent.

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