US stocks turn higher on optimism that inflation will cool further and allow the Fed to ease tightening

  • US stocks closed higher on Tuesday after showing weakness in early trading. 
  • A note from JPMorgan gave investors hope that December inflation could come in around consensus expectations. 
  • That led to investor optimism that the Federal Reserve could ease its tightening campaign further.

US stocks closed higher Tuesday as optimism grew that inflation will continue cooling and give the Federal Reserve more room to ease its tightening campaign.

JPMorgan analysts said the most likely scenario for Thursday’s December consumer price index report is for the reading to come in around consensus estimates. And that would lead to a 2% surge in stocks, the predicted.

Such sentiment overcame relatively hawkish comments from Federal Reserve Chair Jerome Powell, who said at a conference in Stockholm that bringing inflation back down to a 2% target would require “measures that are not popular in the short term as we raise interest rates to slow the economy.” 

“The expectation with this week’s Consumer Price Index is for further easing of inflation pressures. Anything less than broad-based improvement will rattle investors’ nerves and keep the Fed active,” said Greg McBride, 
chief financial analyst at Bankrate. 

Here’s where US indexes stood at the 4:00 p.m. closing bell on Tuesday: 

Here’s what else is going on: 

In commodities, bonds, and crypto: