NEW YORK (AP) — U.S. stocks are jumping amid a global rally Wednesday after a surprise encouraging update on inflation.

The S&P 500 rose 1.1% in afternoon trading and is on track to hit its all-time high set the previous day. The Dow Jones Industrial Average was up 57 points, or 0.2%, as of 1:11 p.m. ET, and the Nasdaq Composite was up 1.8%.

The action was even stronger in the bond market, where Treasury yields fell after the report showed that U.S. consumers paid 3.3% higher prices for food, insurance and everything else last month. compared to the previous year. Economists had expected to see the inflation rate stagnate at 3.4%.

For Wall Street, a slowdown in inflation not only helps US families struggling to keep up with rapidly rising prices, it also opens the door to the Federal Reserve reduce your prime interest rate. Such a measure would ease pressure on the economy and boost investment prices.

Everything from bitcoin to gold to copper rose after inflation data raised expectations for upcoming interest rate cuts. Some nervousness among US stock investors has also eased.

Virtually no one expects the Federal Reserve to begin cutting interest rates at its latest meeting, which is scheduled to end Wednesday afternoon. The Fed has been adamant about the need for an accumulation of data that shows inflation is moving sustainably toward its 2% target.

“This is good news, but we will need more,” according to Lindsay Rosner, head of multi-sector investments at Goldman Sachs Asset Management.

But it’s welcome news, after progress in reducing inflation appeared to have stalled earlier this year. Some recent stronger-than-expected labor market reports have also raised concerns about continued upward pressure on inflation. Of course, slowing inflation too quickly could also raise concerns that US consumer spending is falling too sharply, which could lead to a recession.

Bets among traders were made that the Federal Reserve would cut interest rates as early as September, according to data from CME Group.

This has caused areas of the stock market that tend to benefit most from lower interest rates to perform best amid a widespread recovery.

Smaller companies, which need to borrow to grow and feel the impact of higher interest rates more than their larger rivals, led the market. Smaller stocks in the Russell 2000 index jumped 2.6%.

Real estate stocks also soared. Lower interest rates mean bonds are paying less interest, which can instead steer potential investors toward dividend-paying property owners. Office owner Boston Properties jumped 4.8%.

Lower interest rates can also pull down mortgage rates and inject energy into the real estate market. Construction company DR Horton rose 4.8%.

Oracle helped lead Wall Street’s rally with a 12.1% jump, although it reported weaker profit for the latest quarter than analysts had expected. Financial analysts pointed to strong reserves, including contracts related to artificial intelligence training.

The furore around AI has helped push stocks to record highs despite concerns about high interest rates and the economic slowdown they induce. Nvidia again it was one of the strongest forces pushing the S&P 500 higher, with a 4.4% gain. The chip company became the example of the AI ​​race and its total market value exceeded 3 billion dollars.

The only company to boost the S&P 500 more than Nvidia was Apple, which jumped 4.4%. Its shares have risen over the past two days after receiving an initial cool reception to the announcement of several AI-related offerings coming to its operating systems.

In the bond market, the 10-year Treasury yield fell to 4.26% from 4.40% on Monday and 4.60% a few weeks ago. The two-year Treasury yield, which most closely tracks expectations for the Fed, fell to 4.68% from 4.83% late on Monday.

In stock markets abroad, European indices jumped after the release of encouraging US inflation data. In Asia, where markets closed ahead of the data release, indices were mixed. Japan’s Nikkei 225 index lost 0.7% as investors await the Bank of Japan’s latest interest rate announcement, expected on Friday.

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AP Business Writers Matt Ott and Elaine Kurtenbach contributed.

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