US STOCKS-Wall St gains as inflation data and tech stocks fuel rally

By Abigail Summerville and Johann M Cherian

Dec 18 (Reuters) - Wall Street's main indexes climbed on Thursday as a soft inflation report fed expectations for interest rate cuts by the Federal Reserve, while chipmaker Micron's blowout forecast signaled strong AI demand.

The delayed Consumer Price Index showed that consumer prices increased less than expected in the year to November. The Labor Department's Bureau of Labor Statistics did not publish month-to-month CPI changes after the 43-day shutdown of the government prevented the collection of October data.

"The constructive CPI report ... starts to ease pressure on policymakers further to potentially get more comfortable cutting rates next year," said Bill Merz, head of capital markets research at U.S. Bank’s Asset Management Group. "We’ll want to see follow through next month to ensure there wasn’t too much noise from the shutdown."

A jobless claims report showed new applications fell last week, reversing the prior week's surge and suggesting labor market conditions remained stable in December. Earlier this week, an official jobs report showed U.S. job growth rebounded in November and the unemployment rate rose to 4.6%.

Traders now see a 58% chance for a dovish policy move by the Fed in March, according to CME's FedWatch Tool.

At 2:00 p.m. the Dow Jones Industrial Average .DJI rose 164.24 points, or 0.34%, to 48,050.21, the S&P 500 .SPX gained 67.33 points, or 1.01%, to 6,788.76 and the Nasdaq Composite .IXIC gained 371.90 points, or 1.64%, to 23,065.22.

The three major indexes rebounded from three-week lows on Wednesday. The Russell 2000 index .RUT, tracking rate-sensitive smallcaps, advanced 1%.

Seven of the 11 S&P sectors advanced, led by consumer discretionary's .SPLRCD 1.9% gain as Lululemon LULU.O surged 4.8% on a report that activist investor Elliott has acquired more than a $1 billion stake in the athletic-wear company.

Starbucks SBUX.O also rallied 5.1%.

Among tech stocks, Micron Technology MU.O jumped 13% after the company forecast quarterly profit at nearly double what analysts were expecting on strong artificial intelligence-related demand.

Other memory companies including SanDisk SNDK.O and Western Digital WDC.O also surged, while the Philadelphia SE Semiconductor Index .SOX climbed 3.2%.

Companies' massive debt-backed spending on developing AI technology and uncertainty about how they plan to monetize it have plagued risk-taking this quarter.

Oracle ORCL.N climbed 0.7%, recovering from a fall on Wednesday when funding plans for a Stargate data center sparked a broad equities selloff.

Trump Media & Technology DJT.O jumped 38.1% after the company and fusion power company TAE Technologies said they have agreed to combine in an all-stock deal valued at more than $6 billion.

President Donald Trump signed an executive order to expedite reclassifying cannabis as a less dangerous drug, boosting shares of cannabis companies.

Advancing issues outnumbered decliners by a 2.38-to-1 ratio on the NYSE, and by a 2.08-to-1 ratio on the Nasdaq.

The S&P 500 posted 15 new 52-week highs and no new lows while the Nasdaq Composite recorded 93 new highs and 130 new lows.