Markets Rally on Cooling Inflation Data: Daily Market Update

Inflation cools, markets heat up. A fresh batch of economic data shows price pressures easing faster than expected—and financial markets are responding with a decisive rally.

The Numbers Tell the Story

Don't look for the specific figures here—they're already circulating on every terminal and ticker. The key takeaway is their direction: down. That downward trajectory is the spark that lit today's bullish fuse across major indices.

Why the Rally Makes Sense

It's a classic reflex. Cooling inflation data shifts the central bank narrative. Traders immediately price in a higher probability of postponed rate hikes or even future cuts. That recalculation lowers the discount rate on future earnings, making current equity prices more attractive. It's a Pavlovian response honed over decades, and today, the bell rang loud and clear.

A Cynical Note from the Sidelines

It's amusing how the same market that spent months obsessing over 'transitory' inflation now hangs on every decimal point of its decline—as if the collective memory resets with each new data print. The financial world's goldfish-like attention span remains its most reliable feature.

What's Next?

The rally has momentum, but it faces immediate tests. The next wave of corporate earnings and any hawkish whispers from policymakers could apply the brakes. For now, the bulls are in control, riding a wave of relief that the economic overheating might—just might—be moderating on its own.

TLDR

• Bitcoin rose above $87,000 and ether climbed as Asian markets gained following the Bank of Japan’s interest rate hike to a three-decade high
• The BOJ raised its benchmark rate with Japan’s 10-year government bond yield briefly touching 2% for the first time since 2006
• U.S. markets rebounded with the Nasdaq jumping 1.4% after November CPI data showed inflation at 2.7%, below the 3% estimate
• Micron Technology shares surged 10% on strong earnings that eased concerns about AI spending and helped lift the tech sector
• More than $576 million in crypto liquidations occurred over 24 hours as traders unwound leveraged positions during recent market volatility

Bitcoin and ether pushed higher on Friday as global markets responded positively to two key developments. The Bank of Japan raised interest rates to their highest level in 30 years while U.S. inflation data came in cooler than expected.

Bitcoin climbed above $87,000 during Asian trading hours. Ether also gained ground as the broader crypto market showed strength across multiple tokens.

The Bank of Japan lifted its benchmark interest rate in a MOVE that markets had expected for weeks. Governor Kazuo Ueda had sent hawkish signals leading up to the decision. Japan’s 10-year government bond yield briefly hit 2% for the first time since 2006.

Markets absorbed the rate hike smoothly. The yen weakened against other currencies while Asian stocks moved higher. The MSCI Asia Pacific Index ROSE 0.7% with technology shares leading the gains.

Other major cryptocurrencies joined the rally. Cardano’s ADA, Solana’s SOL, Dogecoin, BNB, and XRP climbed as much as 3%. The CoinDesk 20 index gained 2% on the day.

The crypto market had seen high volatility before the bounce. Over $576 million in liquidations occurred in the previous 24 hours. Most of these liquidations hit long positions as Leveraged traders were forced out.

U.S. stock markets also rebounded on Thursday. The Nasdaq Composite led gains with a 1.4% increase. The S&P 500 rose 0.8% while the Dow Jones Industrial Average added 0.2%.

Tech Sector Gets Boost from Micron Earnings

The tech sector received a lift from Micron Technology’s quarterly results. The company reported earnings late Wednesday that beat expectations. Micron forecast next quarter’s adjusted profit at nearly double what analysts had predicted.

Micron’s stock jumped 10% on the news. The earnings report eased concerns about artificial intelligence spending that had pressured tech stocks earlier in the week. Nvidia and other AI-related companies had dropped on Wednesday after Oracle lost backing for a major data center project.

The November Consumer Price Index report showed inflation rising 2.7% year over year. Economists had expected a 3% increase. Core inflation came in at 2.6%, below the 3.1% estimate.

This is absolutely insane:

Inflation in the US just unexpectedly posted one of the largest monthly declines since 2023.

While a +10 basis point increase in inflation was expected, it actually FELL by -40 basis points.

This puts CORE CPI inflation in the US at its lowest level… pic.twitter.com/gjiWID9ZdL

— The Kobeissi Letter (@KobeissiLetter) December 18, 2025

Rate Cut Expectations Shift After Inflation Data

The softer inflation numbers changed market expectations about Federal Reserve policy. Investors now see a higher chance the Fed could cut interest rates in coming months. Fed governor Chris Waller had already signaled support for rate cuts before the CPI data was released.

Initial jobless claims for the week ending December 13 totaled 224,000. This marked a decrease of 13,000 from the previous week. However, recent jobs data has shown volatility due to the federal government shutdown.

On-chain data shows some shifts in Bitcoin holder behavior. Long-term holders appear close to finishing a prolonged selling phase according to K33 Research. About 20% of bitcoin supply has rotated back into the market over the past two years.

Futures tracking U.S. equities extended their overnight rebound. Markets responded positively to the combination of the smooth BOJ rate decision and cooling U.S. inflation. Asian technology shares performed particularly well in the session.

Traders remain watchful as year-end approaches. Market liquidity typically thins during this period. High leverage use continues in crypto markets despite recent liquidations.

Trump Media & Technology Group announced a $6 billion merger deal with Tae Technologies. The fusion power company has backing from Alphabet and Chevron. TRUMP Media shares surged on the announcement as investors bet on AI-driven energy demand.