Stocks and bonds rallied as a new report indicated inflation was softer than economists expected. This data led Wall Street traders to reduce their bets on further Federal Reserve interest-rate hikes.

The S&P 500 Index climbed, with technology shares leading the advance. The Nasdaq Composite also saw significant gains. Treasury yields fell as the market priced in a lower probability of aggressive rate increases from the Fed.

Despite the positive inflation news, concerns lingered about the semiconductor industry, which experienced a significant downturn. However, the broader market sentiment remained optimistic, driven by the prospect of less restrictive monetary policy.

Investors are now closely watching upcoming economic indicators for further clues on the Fed's future actions. The focus is on whether this cooling inflation trend will persist, potentially paving the way for a pause or even a pivot in interest-rate policy.