What is causing markets to move on Tuesday as stocks rise and the dollar weakens due to low inflation bolstering the Federal Reserve’s dovish approach?

Stocks on Wall Street rallied Tuesday due to a lower-than-expected CPI report in October, which solidified market expectations that the Fed will not raise interest rates. The CPI index remained unchanged on a month-over-month basis in October, but increased 3.2% on an annual basis, falling short of forecasts. Core inflation, excluding energy and food, also decreased more than anticipated to 4%. Traders have now eliminated bets on further rate hikes this year and are currently projecting four rate cuts next year. The S&P 500 Index, Dow Jones, and Nasdaq 100 all experienced significant gains. Small caps, as represented by the Russell 2000, saw the best performance in over a year. Analysts believe that this drop in CPI suggests an end to rate hikes by the Fed, and despite recession concerns, strong consumer spending, low unemployment, and robust corporate profits indicate a continued market rally. Fed officials have commented positively on the October CPI data.