U.S. stocks closed higher Tuesday in a choppy session, after a gauge of consumer prices showed inflation continued to retreat from its June peak. The Dow Jones Industrial Average rose about 105 points, or 0.3%, ending near 34,110, according to FactSet, after initially climbing about 700 points in early trade. The S&P 500 index gained 0.7% and the Nasdaq Composite Index advanced 1%. The latest consumer-price index for November showed annual inflation slowed to 7.1% from 7.7% a month before, adding to the retreat in the cost of living from a pandemic peak of 9.1% in June. Lower inflation, though still painfully high, gave more hope to investors that the Federal Reserve might be able to increase rates at a less dramatic pace than earlier in 2022, while potentially pausing at a “terminal,” or peak, rate that produces a soft-ish landing for the U.S. economy. Bond yields fell Tuesday after the inflation reading, with the 10-year Treasury rate tumbling 11.1 basis points to 3.5%, the biggest daily yield decline for the benchmark rate since Dec. 1, according to Dow Jones Market Data. The focus remains on Wednesday’s Fed rate decision, with expectations running high for a 50 basis point increase, a step down from the recent series of four 75 basis point hikes.
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