US stocks shine after inflation report, oil prices rise as EU tightens sanctions on Russia

US stocks rose sharply on Wednesday, with the Nasdaq closing at an all-time high, as inflation data in line with expectations paved the way for the Federal Reserve to cut interest rates next week. Crude oil prices also rose sharply on news that the European Union (EU) has increased sanctions on Russian oil exports.

At the close, the S&P 500 index increased 0.82% to 6,084.19 points. The Nasdaq index increased 1.77% to 20,034.89 points, marking the first time in history that it closed above 20,000 points.

The Dow Jones index alone fell this session, losing 99.27 points, or 0.22%, to 44,148.56 points.

Technology stocks were the market's mainstays this session. Alphabet, Google's parent company, rose for a second straight session on the back of a quantum computing breakthrough as it unveiled a new chip. Alphabet closed up 5.5%.

Other large-cap tech stocks in the Magnificent group, including Meta Platforms, Nvidia, Tesla and Amazon, also posted impressive gains. Nvidia rose 3% and Tesla nearly 6%, bringing their respective year-to-date gains to 181% and 71%, respectively.

In addition to the rise in technology stocks, the market was also optimistic because inflation data was relatively mild and in line with expectations. Statistics from the US Department of Labor showed that the consumer price index (CPI) in November increased 0.3% compared to October and increased 2.7% compared to the same period last year. Excluding two volatile commodity groups, food and energy, the core CPI increased 0.3% on a monthly basis and increased 3.3% on a yearly basis.

The data showed inflation rose slightly in November from October, but was in line with expectations and traders said the increase was not strong enough to keep the Fed from cutting rates at its meeting next week. In the interest rate futures market, traders are pricing in a nearly 99% chance of a rate cut on Dec. 17-18, according to data from the CME FedWatch Tool.

“We expect the Fed to cut rates at its final meeting of the year. It’s no surprise that the market is still trending higher, and there’s nothing that will derail the market from that direction for the rest of the year,” Tom Hainlin, chief market strategist at US Bank Asset Management, told CNBC.

In the energy market, Brent crude oil futures in London increased by 1.33 USD/barrel, equivalent to an increase of 1.84%, closing at 75.32 USD/barrel. WTI crude oil futures in New York increased by 1.7 USD/barrel, equivalent to an increase of 2.48%, closing at 70.29 USD/barrel.

EU ambassadors on Wednesday agreed the bloc's 15th package of sanctions against Russia over the war in Ukraine, according to Hungary, which holds the rotating EU presidency.

“I welcome the adoption of the 15th package of EU sanctions, in particular the measures targeting the secretive Russian tanker fleet,” European Commission (EC) President Ursula von der Leyen wrote on social network X.

Russia is believed to have secret oil tankers to help it avoid the $60/barrel price ceiling that the G7 countries imposed on Russian crude oil exported by sea from 2022. With the backing of that fleet, the flow of Russian oil to the global market has been essentially uninterrupted.

However, oil prices' gains on Wednesday were limited by a weekly report from the US Energy Information Administration (EIA) showing that US gasoline and distillate inventories rose more than expected last week.

In addition, the monthly report of the Organization of the Petroleum Exporting Countries (OPEC) for the fifth consecutive time cut its forecast for global oil demand growth in 2024 and 2025. Weakening oil demand, especially China's demand, while oil supply outside the OPEC+ alliance increased sharply, is the reason behind this forecast cut.

“OPEC is coming to terms with the reality they face. The reduction in demand growth forecasts shows that OPEC has a lot of work to do to balance the oil market in 2025,” John Kilduff, a fund manager at Again Capital, told Reuters.