NEW YORK, July 12 — Wall Street rallied today, led by gains in rate-sensitive megacap growth stocks after data showed inflation cooled further in June and boosted hopes that the Federal Reserve was nearing the end of its monetary tightening cycle.

US consumer prices rose modestly in June and logged their smallest annual increase in more than two years as inflation continued to subside.

The much awaited US Labour Department report showed growth in core consumer prices, which excludes food and energy, eased to 4.8 per cent from 5.3 per cent in May on an annual basis. Economists had expected a 5 per cent rise.

In the 12 months through June, the consumer prices (CPI) advanced 3.0 per cent. It was the smallest year-on-year increase since March 2021 and followed a 4.0 per cent rise in May.

Market participants were now betting with a 26 per cent probability that the central bank would lift short-term borrowing costs by 25 basis points in November this year, compared with a 34 per cent probability before the data was reported.

An overwhelming majority of traders continue to expect the Fed to raise the benchmark rate to the range of 5.25 per cent-5.5 per cent later this month.

"The CPI report has come in lighter-than-expected both on the headline and on the core and the markets are reacting in a positive fashion to that report,” said Art Hogan, chief market strategist at B Riley Wealth.

"Its policy implications are clear, the Fed is at or near the end of this rate hike cycle.”

At 09.46am ET, the Dow Jones Industrial Average was up 282.05 points, or 0.82 per cent, at 34,543.47, the S&P 500 was up 40.07 points, or 0.90 per cent, at 4,479.33, and the Nasdaq Composite was up 161.15 points, or 1.17 per cent, at 13,921.85.

Megacap growth and technology stocks such as Microsoft, Amazon.com and Tesla added between 1.2 per cent and 1.6 per cent.

Ten of the 11 major S&P 500 sectors advanced, led by gains in consumer discretionary stocks that added 1.1 per cent in early trading.

The CBOE Market Volatility Index, Wall Street’s fear gauge hit a one-week low at 14.06.

Nvidia added 2.0 per cent after the Financial Times reported that chip designer Arm is in talks to bring the megacap firm in as an anchor investor ahead of its planned listing.

Cisco Systems shed 0.6 per cent as BofA downgraded the networking equipment maker’s rating.

Later this week, the focus will shift to second-quarter earnings season, with Wall Street lenders expected to report higher profits for the quarter as rising interest payments offset a reduction in dealmaking.

Advancing issues outnumbered decliners by a 7.22-to-1 ratio on the NYSE and a 3.26-to-1 ratio on the Nasdaq.

The S&P index recorded 56 new 52-week highs and one new low, while the Nasdaq recorded 92 new highs and 3 new lows. — Reuters