Market Rallies as Inflation and Employment Data Show Unexpected Strength

Stock index futures surged on encouraging economic indicators released this week. The Dow climbed from +100 points to +215 points following the reports, while the S&P 500 advanced from +41 to +53, and the Nasdaq pushed higher from +280 to +344. Bond yields also recalibrated favorably, with the 10-year Treasury settling at +4.12% and the 2-year at +3.46%. These moves suggest investors are interpreting the latest economic signals as supportive for equities heading into year-end trading.

The CPI Report Delivers a Surprise to the Downside

The most closely-watched piece of economic data this week proved to be the Consumer Price Index release for November, which printed substantially softer than the market had anticipated. Both headline and core CPI readings came in at +0.2% month-over-month, each undershooting the consensus projection of +0.3% by a meaningful margin. This represents the weakest monthly pace in eight months, last matched in April when headline CPI registered a 4.5-year low of +2.3%.

On a year-over-year basis—the measure commonly referred to as the Inflation Rate—the results were even more impressive. Headline inflation decelerated to +2.7%, falling well short of the +3.1% expectation. Core inflation, which strips out volatile commodity swings, similarly surprised to the downside at +2.6% versus the anticipated +3.0%.

The composition of the inflation slowdown offered additional reassurance to market observers. Energy prices rose +1.1% over the two-month stretch, though recent softening in energy markets suggests this component could show further moderation in the next report. Food prices increased just +0.1%, while Shelter—one of the stickier inflation categories—posted a modest +0.2% gain. Prices for Lodging away from home, Recreation, and Apparel all declined during this period, indicating broadening disinflationary momentum across the consumer basket.

Employment Market Shows Resilience Without Overheating

Labor market data complemented the inflation story with evidence of sustainable job conditions. Weekly Jobless Claims printed at +224K for the prior week, marking a notable decline from the upwardly-revised +237K recorded the week before. The four-week moving average now rests at a healthy +217K, supported by recent dips into sub-200K territory.

Continuing Claims—a measure of workers receiving ongoing unemployment benefits—ticked up to 1.897 million from 1.830 million in the previous week. However, this still represents a significant improvement, with long-term jobless claims declining by 100K over the past month. The labor market has now maintained positioning below the 1.9 million threshold for several weeks, never approaching the 2 million level that would trigger concerns about labor force deterioration.

The juxtaposition of modest job hiring (as reflected in recent Bureau of Labor Statistics employment reports) against stable jobless claims suggests a market operating under a “no hire, no fire” dynamic. This pattern underscores lingering uncertainty about the economic trajectory into 2026, with labor metrics likely to remain range-bound until clearer signals emerge regarding whether the economy will sustain expansion or face headwinds toward contraction.

Market Positioning for the Path Ahead

Today’s data confluence—softer inflation readings combined with stable employment conditions—removes a significant obstacle for equity market performance in the near term. The absence of hawkish economic surprises leaves little reason to anticipate headwinds for broad-based stock market strength, barring unforeseen developments during the trading session. This combination of diminishing price pressures and resilient labor conditions creates a supportive backdrop for risk assets as the year draws to a close.