Nov 13 (Reuters) - Wall Street's three major indexes rose on Wednesday after October data showed consumer prices rising in line with expectations, adding support to bets that the U.S. Federal Reserve will cut interest rates in December.
The consumer price index (CPI) rose 0.2% in October for the fourth straight month and advanced 2.6% on an annual basis, the Labor Department's Bureau of Labor Statistics said. Excluding the volatile food and energy components, the CPI increased 0.3% in October, meeting economists' forecasts.
After the report, traders' bets reflected a more than 82% probability for a 25 basis-point interest rate cut at the Fed's December meeting, up from 58.7% on Monday, according to CME group's FedWatch tool, opens new tab.
While some Fed officials sounded more cautious on Wednesday, Minneapolis Fed President Neel Kashkari told Bloomberg TV that he was confident inflation was headed down, noting that the CPI data "confirms" that downward path.
"There's some relief inflation didn't come in ahead of expectations. That was a concern coming into today's CPI report," said Angelo Kourkafas, senior investment strategist at Edward Jones. "The fact we got a right in-line number helped alleviate some of those fears. Nothing we saw today from today's data argues against a December rate cut."
Outperformance in the consumer discretionary sector index (.SPLRCD), opens new tab, up more than 1% on the day, was likely due to bets on rate cuts, according to Kourkafas.
Still, Dallas Federal Reserve President Lorie Logan said the U.S. central bank should proceed cautiously on further interest rate cuts to keep from inadvertently reigniting inflation.
St. Louis Fed President Alberto Musalem said the Fed is in the "last mile" of its inflation fight though recent data raised the risk that progress may slow or reverse, on Wednesday.
At 2:22 p.m. EST the Dow Jones Industrial Average (.DJI), rose 116.96 points, or 0.27%, to 44,028.41, the S&P 500 (.SPX), gained 15.17 points, or 0.25%, to 5,999.16 and the Nasdaq Composite (.IXIC), gained 28.69 points, or 0.15%, to 19,310.09.
Among the S&P 500's 11 major industry sectors the biggest gainers were energy (.SPNY), and consumer discretionary while defensive utilities (.SPLRCU), was the biggest loser.
Also implying December rate cut bets, U.S. Treasury 2-year yields fell sharply after the inflation report.
However, the benchmark 10-year yield regained ground it lost after the data and was last up on the day at 4.45% as investors focused on longer-term expectations that President-elect Donald Trump's policies could exacerbate inflation.
Rising yields had helped push the three major Wall Street indexes to close lower on Tuesday as investors took profits after a post-election rally. Despite inflation worries, investors are hopeful of a pro-business stance and possible tax cuts from the incoming U.S. president.
Spirit Airlines' (SAVE.N), shares plunged about 58% after a report the U.S. carrier is preparing to file for bankruptcy protection, while the company said it is talking with creditors.
EV maker Rivian (RIVN.O), soared 16% after Volkswagen (VOWG_p.DE), on Tuesday raised its investment in the company by 16% to $5.8 billion.
Advancing issues outnumbered decliners by a 1.06-to-1 ratio on the NYSE where there were 328 new highs and 99 new lows.
On the Nasdaq, 1,823 stocks rose and 2,369 fell as declining issues outnumbered advancers by a 1.3-to-1 ratio. The S&P 500 posted 56 new 52-week highs and 15 new lows while the Nasdaq Composite recorded 190 new highs and 133 new lows.
Reporting by Sinéad Carew in New York, Lisa Mattackal and Purvi Agarwal in Bengaluru; Editing by Shounak Dasgupta and Matthew Lewis
