The S&P 500 and Nasdaq have jumped, racking up their biggest daily percentage gains in more than two years as a sign of slowing inflation in October sparked speculation the Federal Reserve might become less aggressive with interest rate hikes.
Stocks in sectors across the board surged as the latest consumer price data cheered investors worried that ongoing interest rate hikes could hobble the United States economy.
One-time Wall Street darlings tarnished in 2022's bear market were among Thursday's strongest performers, with Nvidia jumping about 14 per cent, Meta Platforms climbing 10 per cent and Alphabet rising 7.6 per cent.
The Labor Department's data showed the annual CPI number below 8.0 per cent for the first time in eight months.
"This is a big deal," King Lip, chief strategist at Baker Avenue Asset Management in San Francisco said.
"We have been calling the peak of inflation for the last couple of months and just have been incredibly frustrated that it hasn't shown up in the data. For the first time, it has actually shown up in the data."
Growing recession worries have hammered Wall Street this year.
The S&P 500 remains down about 17 per cent year to date and is on course for its biggest annual decline since 2008.
The inflation data prompted traders to adjust rate hike bets, with odds of a 50-basis point rate hike in December, rather than a 75-basis point hike, jumping to about 85 per cent from 52 per cent before the data was released, according to the CME FedWatch tool.
San Francisco Fed President Mary Daly and Dallas Fed President Lorie Logan welcomed the most recent inflation data but warned that the fight with rising prices was far from over.
Amazon.com Inc surged more than 12 per cent after the Wall Street Journal reported that the e-commerce heavyweight was reviewing unprofitable business units to cut costs.
The S&P 500 climbed 5.54 per cent to end the session at 3956.31 points.
The Nasdaq gained 7.35 per cent to 11,114.15 points, while Dow Jones Industrial Average rose 3.70 per cent to 33,715.37 points.
All 11 S&P 500 sector indexes rallied, led by information technology, up 8.33 per cent, followed by a 7.74 per cent gain in real estate.
The Philadelphia semiconductor index surged 10.2 per cent, cutting its loss in 2022 to about 32 per cent.
The CBOE volatility index, also known as Wall Street's fear gauge, fell to a near two-month low of about 23 points.
Some investors urged caution that Thursday's rally may be overdone.
"The market is - as it has been a few times this year - very eager to trade a 'Fed pivot' ... but we think the market is getting a little ahead of itself based on one print," said Zach Hill, head of portfolio management at Horizon Investments in Charlotte.
The PHLX Housing index jumped 10.3 per cent to its highest since August after tumbling this year over concerns about higher mortgage rates denting affordability.
Rivian Automotive Inc surged 17.4 per cent after the electric-vehicle maker reported a smaller-than-expected loss, higher number of pre-orders and reaffirmed its full-year production outlook.
The Dow has now recovered about 17 per cent from its closing low on September 30 and remains down about 9.0 per cent from its record high close in early January.
Advancing issues outnumbered falling ones within the S&P 500 by a 26.9-to-one ratio.
The S&P 500 posted 19 new highs and no new lows; the Nasdaq recorded 120 new highs and 166 new lows.
Volume on US exchanges was heavy, with 14.9 billion shares traded, compared to an average of 11.9 billion shares over the previous 20 sessions.