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Stocks rallied following positive inflation data, easing concerns over a potential government shutdown. The S&P 500, down nearly 3% earlier in the week, ended up 1.1%, while Broadcom's shares surged over 5% on strong earnings and AI demand, solidifying its position as a top S&P 500 stock.
The S&P 500 dipped 0.3% but remains close to its record high, up 26.5% for the year. Following the CPI report, which showed persistent inflation, markets are pricing in a near certainty of a Federal Reserve rate cut next week, despite concerns over stubborn inflation pressures. Core services inflation eased slightly, but rising prices in other sectors, particularly for cars and hotels, keep the Fed cautious.
President-elect Donald Trump's proposed tariffs on imports from China, Mexico, and Canada could disrupt inflation and investment, potentially reversing progress made by the Federal Reserve. Economists predict an 8% increase in import prices, pushing headline PCE above 3%, while also widening the trade deficit as companies may front-load imports in anticipation of the tariffs.
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