The stock market witnessed a historic rally this week, with both the S&P 500 and NASDAQ hitting all-time highs. The Dow Jones jumped nearly 500 points, fueled by optimism surrounding inflation data and potential rate cuts from the Federal Reserve. Investors reacted to fresh CPI report showing headline inflation at 2.7%, slightly below expectations, and core CPI at 3.1%, a slight increase from June. This positive trend was echoed in global markets with Asian equities mirroring Wall Street’s gains. Japan’s Nikkei 225 hit an all-time high driven by tech and industrial companies like Yokohama Rubber and Renesas Electronics, while the Chinese Hang Seng rose 1% and the Shanghai Composite reached its highest level since late 2021. The rally is largely attributed to growing confidence that U.S. interest rates will soon be lowered. 94% of market participants now anticipate a rate cut in September. This optimism has spread across Wall Street, further bolstering gains overseas. The S&P 500 closed above 6,400, while the NASDAQ also broke records. Small-cap stocks outperformed with the Russell 2000 soaring nearly 3%, showing the market’s sensitivity to short-term interest rate movements. The rally was further fueled by anticipation of lower borrowing costs in the U.S., as this generally boosts the stock market. The CPI report, however, also revealed that inflation remains under control, providing reassurance to traders concerned about prolonged Fed tightening. Analysts anticipate additional rate cuts in October and December based on the current economic outlook. The positive trend is also evident in Asia, with markets mirroring the U.S. gains driven by a similar outlook of lower U.S. interest rates benefiting global liquidity. The upcoming Producer Price Index (PPI) report and Retail sales data for consumer spending will provide further insights into the market’s trajectory. While stock market performance has been impressive, investors remain cautious, aware that concerns about labor market trends and slower growth might pose a challenge to this bullish trend. Cryptocurrencies also climbed after the inflation report, with Ether hitting its highest level since December 2021 and approaching all-time highs, fueled by renewed investor appetite and strong inflows into Ethereum-based ETFs and institutional products. The rally in tech stocks was also driven by Intel shares rising over 5%, following CEO Lip-Bu Tan meeting with President Trump despite recent tensions. While some sectors like Cava suffered a decline following missed revenue expectations, the market overall remains optimistic, anticipating further gains fueled by potential rate cuts from the Federal Reserve.