Cooler Inflation Supports a Relief Rally: Stock Market Today

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A belated but better-than-expected read on still-spotty consumer price data was enough to support a relief rally for the stock market on Thursday. Strong earnings and guidance from a major player in the AI revolution provided a fresh bounce for a beleaguered technology sector and elevated the risk-on mood.

Core inflation has cooled to its lowest level since early 2021, according to the November CPI report. The Consumer Price Index (CPI) increased at an annual rate of 2.7% through November and 0.2% from September to November, the Bureau of Labor Statistics said before the opening bell.

Core CPI, which excludes food and energy prices, was up 2.6% for the 12 months and 0.2% for the two months through November. Both headline and core CPI were better than expected. The BLS did not collect survey data for October amid the longest government shutdown in U.S. history. Regular CPI data collection resumed on November 14.

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"What matters for overall purchasing power is the average of consumer prices," Comerica Bank Chief Economist Bill Adams writes, "and that average is rising at a slower pace. That will help purchasing power and consumer demand."

At the same time, Adams concludes, "The Fed will be cheered to see inflation rising more slowly and especially encouraged by the multi-year low in core CPI." The economist forecast the Fed will cut the federal funds rate by another 75 basis points next year, "with most of that reduction likely to come after Chair Powell's term ends in May."

Amazon.com (AMZN, +2.5%), Nvidia (NVDA, +1.9%) and Microsoft (MSFT, +1.7%) were three of the top four Dow Jones stocks, as hyperscalers and their revolutionary leader rose on renewed AI optimism.

Consumer discretionary stocks, led by Lululemon Athletica (LULU, +3.5%), were tops among the 11 sectors, followed by communication services, tech and utility stocks.

The Wall Street Journal reported that Elliott Investment Management has established a position worth more than $1 billion in LULU, which had a market cap of $24.4 billion as of Wednesday's closing bell.

By Thursday's closing bell, the tech-heavy Nasdaq Composite had surged 1.4% to 23,006. The blue-chip Dow Jones Industrial Average was up 0.1% at 47,951 and ended a four-session losing streak. The broad-based S&P 500 had added 0.8% to 6,774, also ending a four-session losing streak.

MU is good for AI

Micron Technology (MU, +10.1%) exceeded all expectations with its fiscal 2026 first-quarter report after Wednesday's closing bell, and the tech stock was up as much as 16.8% on Thursday.

Management reported earnings of $4.78 per share (+167.0% year over year) on revenue of $13.64 billion (+56.6% YoY). Micron also guided to second-quarter EPS of $8.42 on revenue of $18.70 billion.

"Our Q2 outlook reflects substantial records across revenue, gross margin, EPS and free cash flow," CEO Sanjay Mehrotra said, "and we anticipate our business performance to continue strengthening through fiscal 2026."

According to Wedbush analyst Matt Bryson, management's guidance "significantly increased the probability" Micron can achieve gross margins in the mid-70% range and also "accelerated the timeline to getting there."

Bryson reiterated his Outperform (Buy) rating and raised his 12-month target price on MU stock from $300 to $320. MU is trading well below typical multiples, Bryson notes, and there's room for more upside over the next few quarters in his earnings model.

"We see no reason to temper our optimism," the analyst concludes.

DJT goes nuclear

Trump Media & Technology (DJT, +41.9%) is merging with privately held TAE Technologies in an all-stock deal valued at $6 billion that creates another way to invest in the nuclear revolution (and/or the nuclear insurgency). That DJT is, technically, a communication services stock and TAE is a fusion power company doesn't matter today.

The transaction will create one of the world's first publicly traded fusion companies, according to the Trump-TAE press release, combining Trump Media's "access to significant capital" with TAE's leading fusion technology.

The combined company plans to site and begin construction on the world’s first utility-scale fusion power plant, with generation capacity of 50 megawatts (MW), in 2026.

Capacity for future additional plants will be in the range of 350 MW to 500 MW. Those ambitions are supported by the "strength of TMTG's strong balance sheet."

Indeed, Trump Media will provide up to $200 million in plus an additional $100 million in the future to TAE. DJT CEO Devin Nunes and TAE CEO Dr. Michl Binderbauer will be co-CEOs of the combined company.

"Fusion power plants are expected to provide economic, abundant, and dependable electricity that would help America win the A.I. revolution and maintain its global economic dominance," DJT and TAE say.

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David Dittman is the former managing editor and chief investment strategist of Utility Forecaster, which was named one of "10 investment newsletters to read besides Buffett's" in 2015. A graduate of the University of California, San Diego, and the Villanova University School of Law, and a former stockbroker, David has been working in financial media for more than 20 years.