Dow climbs 660 points and Nasdaq soars 3% after November inflation cools to lowest level in nearly a year

• US stocks soared Tuesday following the release of the November inflation report.
• Headline inflation eased to 7.1%, the slowest reading since December 2021.

US stocks soared Tuesday as investors cheered the November Consumer Price Index reading which showed headline inflation eased by more than anticipated, bolstering the view that the Federal Reserve can downsize future interest rate increases.

The S&P 500 was on track for a second straight gain and Dow industrial futures jumped by more than 650 points after the Labor Department's latest inflation update. The Nasdaq was up over 3%.

The headline Consumer Price Index rose to 7.1% year over year, softer than the 7.3% estimate in a Bloomberg survey of economists. It was the lowest reading since December 2021 when inflation stood at 7%. Core CPI rose 6% year-over-year, below the projection of 6.1%.

The report arrived one day before the Federal Open Market Committee, led by Chair Jerome Powell, is expected to deliver its seventh and final rate increase of 2022.

"Powell wants to show the market that the days of the big, 75 basis point hikes are over and the pace is slowing, so it's likely that the Fed announces a smaller 50 basis point rate hike on Wednesday," Nancy Davis, portfolio manager of the Quadratic Interest Rate Volatility and Inflation Hedge Exchange-Traded Fund, said in a note.

Here's where US indexes stood at the 9:30 a.m. opening bell on Tuesday:

• S&P 500: 4,087.26, up 2.42%

• Dow Jones Industrial Average: 34,665.40, up 1.94% (660.36 points)

• Nasdaq Composite: 11,552.59, up 3.67%

"The Fed is facing a tricky dynamic in 2023, as the market is expecting the Fed to end its hiking cycle, and the Fed certainly wants to end its hikes early in 2023 before any significant economic damage occurs," said Davis. "[But] there is a possibility that inflation continues to run much higher than its 2% target even after it stops raising interest rates."

Outside of equity indexes, investors were watching for developments surrounding the arrest Monday of Sam Bankman-Fried, the former CEO and founder of crypto exchange platform FTX, in the Bahamas on behalf of the US government. The arrest, coming a month after FTX collapsed, was based on a sealed indictment filed by the Southern District of New York.

Separately, the Securities and Exchange Commission charged him with defrauding $1.8 billion out of investors.

Here's what else is happening today:

• Binance temporarily paused withdrawals of stablecoin USDC after customers pulled over $2 billion in funds over worries about the crypto exchange's stability.
• Billionaire investor Jeff Gundlach sees the odds of the Fed switching to cutting interest rates at more than 75% as the US economy is likely to enter a recession.
• FTX's new CEO John J. Ray plans to reveal five ways the crypto exchange handled its money at Tuesday's US House Financial Services Committee.

In commodities, bonds, and crypto:

• West Texas Intermediate crude picked up 2.1% to $74.93 per barrel. Brent crude, the international benchmark, rose 2.4% to $79.82.
• Gold rose 2.1% to $1,830.20 per ounce.
• The 10-year Treasury yield fell 11 basis points to 3.48%.
• Bitcoin rose 3.6% to $17,778.04.