U.S. stocks staged a powerful rally Thursday, snapping a four-day losing streak on a double dose of good news: inflation came in cooler than expected, and Micron's blowout earnings reignited faith in the AI trade.
The Nasdaq Composite led the charge with a 1.5% gain, while the S&P 500 rose about 1% and the Dow Jones Industrial Average climbed 0.7%, adding roughly 340 points.
What Sparked the Rally
Two catalysts converged to lift sentiment:
Inflation relief: The November CPI came in at 2.7% year-over-year, below the 3.1% economists expected. Core inflation hit 2.6%—the lowest since March 2021. For a market worried about sticky prices delaying Fed rate cuts, the data was a welcome surprise.
Micron's AI validation: The memory chipmaker surged 12% after reporting earnings that crushed estimates and guiding for Q2 revenue of $18.7 billion—far above the $14.2 billion expected. The results confirmed that AI demand remains robust, countering concerns that the trade had become overextended.
Sector Performance
Technology led the market higher, bouncing back from Wednesday's AI-driven selloff. Semiconductor stocks broadly outperformed on the Micron news. The Philadelphia Semiconductor Index gained more than 2%.
Rate-sensitive sectors also benefited from the inflation data. Real estate and utilities climbed as Treasury yields fell, with the 10-year note easing to around 4.13%.
Individual Movers
Beyond Micron, several stocks made headlines:
- Trump Media (DJT): Soared 35% on fusion company merger announcement
- Lululemon (LULU): Rose 8% on Elliott Investment's activist stake
- Nvidia (NVDA): Recovered some recent losses on broader AI optimism
The Bigger Picture
Thursday's rally comes at a critical juncture. Stocks had been under pressure as AI bubble fears resurfaced and economic data painted a mixed picture. The combination of cooling inflation and Micron's fundamental validation addressed both concerns simultaneously.
The market needed a reason to believe, and it got one—two of them, actually.
Looking Ahead
Investors still face event risk. Nike and FedEx report earnings after the bell Thursday. The Bank of Japan's rate decision arrives overnight, with potential to move currency and equity markets globally. And the final trading week before Christmas often brings thin volumes and heightened volatility.
The Bottom Line
One day doesn't make a trend, but Thursday's rally suggested the bull market isn't dead yet. Cooler inflation keeps the Fed on track for further easing. Micron's results prove AI demand is real, not just hype. For investors who stayed the course through this week's volatility, patience is being rewarded.
